Moving Averages
A 1-minute lesson from the MarketPro academy, one of 26 in technical analysis.
A moving average (MA) smooths price by averaging the last N closes. The simple moving average (SMA) weights all periods equally; the exponential moving average (EMA) weights recent prices more heavily and therefore turns faster.
What they are
A moving average (MA) smooths price by averaging the last N closes. The simple moving average (SMA) weights all periods equally; the exponential moving average (EMA) weights recent prices more heavily and therefore turns faster. Common lengths are 20 (short-term), 50 (medium) and 200 (long-term).
Three practical uses
- Trend filter: price above a rising 200 EMA is a simple, robust definition of an uptrend. Many systematic strategies only take longs above it and shorts below it.
- Dynamic support/resistance: in steady trends, pullbacks often stall near the 20 or 50 EMA.
- Crossovers: a faster MA crossing a slower one (for example 20 above 50) signals momentum shift. Crossovers work in trending markets and whipsaw badly in ranges.
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Step 4 of 10 on Chart Reading Essentials
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