Moving Averages

How Moving Averages is calculated

A simple moving average (SMA) adds the closing prices over a chosen lookback, such as 50 periods, and divides by that number. An exponential moving average (EMA) does the same but weights recent prices more heavily, so it reacts faster to new moves.

How Moving Averages is used

• →Read the slope and price position: above a rising average is an uptrend, below a falling one is a downtrend.
• →Use crossovers, such as a fast average crossing a slow one, as a simple trend-change signal.
• →Treat key averages like the 50 and 200 as dynamic support and resistance.
• →Match the length to your timeframe: shorter for fast trading, longer for position context.

Common mistakes

• ✕Trading every crossover in a choppy, sideways market where they whipsaw.
• ✕Using an average so short it just tracks price and adds no information.

Watch: Moving Averages explained