Charts & technicals
Moving average
Also called MA, SMA or EMA
The average price over a trailing window, used to smooth out day-to-day noise.
How it works
A 50-day moving average is the mean of the last fifty closes, recalculated daily. An exponential version weights recent prices more heavily.
Its only content is past prices, so it always lags. It describes the trend so far rather than predicting the next one.
Where it misleads people
Crossovers of two moving averages are the most widely tested rule in existence, which means any edge has been competed away. They also generate many false signals in sideways markets.
Related terms
- Technical analysisStudying price and volume history to inform decisions, rather than studying the business.
- MomentumThe tendency of recent winners to keep outperforming, and losers to keep underperforming, over months.
- TrendA sustained directional movement in price over time.
- Golden cross and death crossWhen a shorter moving average crosses above or below a longer one.
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