Definition
A moving average (MA) averages price over a defined number of periods, smoothing noise to reveal trend.
SMA vs EMA
- **Simple Moving Average (SMA)**: unweighted average of the last N closes
- **Exponential Moving Average (EMA)**: weights recent prices more, reacts faster
Common Settings
- **20 EMA**: short-term momentum
- **50 SMA**: medium-term trend
- **200 SMA**: long-term trend and institutional benchmark
How Traders Use MAs
- Direction of the slope defines trend
- Price above the MA = bullish bias
- Price crossing an MA = signal to reassess
- MA cross ("golden cross" / "death cross") = long-term signal
Support and Resistance
Rising MAs often act as dynamic support; falling MAs as dynamic resistance. Watch how price interacts with the 20 EMA on your working timeframe.
Limitations
- Lagging by nature
- Weak in ranges (whipsaws)
- Different settings suit different market conditions
Key Takeaways
- MAs smooth price to reveal the underlying trend.
- Use them for bias and dynamic S/R, not as sole entry signals.
- Combine with structure and volatility filters.