What Is Moving Average?
A Moving Average (MA) smooths price action by averaging closing prices over a defined number of periods. It produces a single line that follows price with a lag, removing short-term noise to reveal the underlying trend.
The most common MAs are 20, 50, 100, and 200 periods. Shorter MAs react faster but produce more false signals; longer MAs are slower but more reliable as trend filters.
Key uses of moving averages:
- Trend identification. Price above a rising MA = uptrend. Price below a falling MA = downtrend. - Dynamic support/resistance. Major MAs (especially 50 and 200) often act as price floors in uptrends and ceilings in downtrends. - Crossover signals. Faster MA crossing above slower MA (golden cross) is a bullish signal; opposite (death cross) is bearish.
Types include Simple (SMA), Exponential (EMA), and Weighted (WMA). For most retail use cases, EMAs are preferred for short-term decisions, SMAs for long-term.
Related terms
- EMA (Exponential Moving Average) — Moving average that gives more weight to recent prices, reacting faster than a simple average.
- SMA (Simple Moving Average) — Moving average that gives equal weight to every period in the lookback window.
- Trend — The general direction of price movement over a period — uptrend, downtrend, or sideways.