RiskPicksWhat is a Moving Average?
A moving average (MA) smooths out price data by creating a constantly updated average price over a specific number of periods. The two most common types are:
- SMA (Simple Moving Average): equal weight to all periods
- EMA (Exponential Moving Average): more weight to recent prices, reacts faster
Common moving averages
- 9 EMA / 20 EMA: short-term trend, used by day traders
- 50 SMA: medium-term trend
- 200 SMA: long-term trend, the "line in the sand" for institutional traders
Trading signals
When price is above a moving average, the trend is considered bullish. A golden cross (50 MA crossing above 200 MA) is a bullish signal. A death cross (50 crossing below 200) is bearish.