How to Use Moving Averages (SMA and EMA)
What is a moving average?
A line built by averaging a set number of closes and shifting the window with every new candle. It filters out price noise and shows the direction of the trend.
SMA vs EMA
The simple average (SMA) weights all days equally. The exponential average (EMA) weights recent days more, so it reacts faster to price changes.
20, 50 and 200 periods
20 stands for the short, 50 for the medium and 200 for the long-term trend. Price above the 200-day average is read as a long-term uptrend.
Crossovers
A short average crossing above a long one is called a golden cross; crossing below is a death cross. They often give false signals in sideways markets and are confirmed with volume and other indicators.
Sourced notes
According to StockCharts ChartSchool, a simple average weights all days equally while an exponential average weights recent days more and reacts faster; both are based on past prices so they lag, and longer periods lag more[1]. The 50-day average is a common reference for the medium-term trend and the 200-day for the long-term trend[1].
Limits
Moving averages are based on past data and lag. This page is educational, not investment advice.
Frequently asked questions
- What is the difference between a simple and an exponential moving average?
- A simple average weights all days equally; an exponential average weights recent days more and reacts faster. Both are based on past prices so they lag, and longer periods lag more[1].
- What are the 50- and 200-day averages used as a reference for?
- The 50-day average is a common reference for the medium-term trend and the 200-day for the long-term trend[1].
Related guides
Sources
- Moving Averages - Simple and Exponential. StockCharts ChartSchool. Accessed: 2026-10-22.