Moving averages (SMA, EMA)

Simple vs exponential, golden cross, death cross.

TL;DR

Moving averages smooth price into a single line representing average price over N periods. They reveal trend direction and act as dynamic support/resistance. SMA is equal-weight; EMA gives recent candles more weight.

SMA vs EMA

Two flavours, different responsiveness.

→Simple Moving Average (SMA) — straight average of last N closes
→Exponential Moving Average (EMA) — weights recent closes more heavily, responds faster
→Use SMA for slow, structural levels. Use EMA when you want momentum responsiveness.

The classic periods

Certain MA periods carry institutional weight — they appear on so many screens they become self-fulfilling support/resistance.

→20-period — short-term trend, responsive
→50-period — medium-term trend, key for swing traders
→100-period — intermediate trend
→200-period — long-term trend; THE most-watched MA in markets

Golden cross / death cross

Two famous MA crossovers signal regime shifts. Golden cross: 50-day SMA crosses above 200-day SMA — bullish. Death cross: 50 crosses below 200 — bearish. Lagging signals, but historically reliable trend filters.

Worked example

200-day MA as support on Apple

AAPL has rallied for months. In a pullback, price approaches the 200-day SMA at $210.

1Current price$214
2200-day SMA$210
3Distance2% above the MA
4TestPrice dips to $209.50, closes back at $211
5Interpretation200-day held as support — bullish trend intact

Takeaway

The 200-day MA is one of the most-watched levels in markets. Holding it on a pullback is a strong sign the trend is still intact.

Common mistakes

What to avoid

!Treating MA crossovers as standalone signals — they lag and produce false positives in chop
!Using a single MA period across asset classes with very different volatility profiles
!Forgetting that MAs are lagging — by definition they confirm what's already happened
!Overloading charts with five MAs — pick 1–2 that actually inform your decisions

Self-check

Test yourself

Q1What's the difference between SMA and EMA?+

SMA weights all periods equally; EMA gives more weight to recent periods, making it more responsive.

Q2What's a golden cross?+

When the 50-period MA crosses above the 200-period MA — a bullish regime change signal.

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