Moving averages explained: the 20, 50 and 200-day averages
A moving average smooths out daily ups and downs so you can see the direction of a market. It is the most widely used line on any price chart.
What it is
A 20-day moving average is the average closing price of the last 20 days. Each new day, the oldest day drops out and the newest comes in, so the average "moves" along with the chart.
The common ones
- 20-day: the short-term trend, about one month of trading.
- 50-day: the medium-term trend.
- 200-day: the long-term trend. Many investors call a market in an uptrend when it is above its 200-day average.
Simple and exponential
A simple moving average (SMA) weights every day equally. An exponential moving average (EMA) gives recent days more weight, so it reacts faster to new moves and also gives more false turns.
How people use them
- Direction: price above a rising average suggests an uptrend.
- Reclaiming the average: a close back above the 20-day average after being below it. Our scanner lists these as "back above 20-day average".
- Crosses: when the 50-day crosses above the 200-day it is called a "golden cross"; below, a "death cross". They are slow signals that often arrive after much of the move.
Limits
Moving averages always lag, because they are built from the past. In a sideways market the price crosses them again and again, giving many false signals. They describe the trend; they do not predict it.
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See coins back above their 20-day averageThis guide is educational and is not financial advice.
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Frequently asked questions
What is the 200-day moving average?
The average closing price of the last 200 trading days, used to judge the long-term trend.
What is a golden cross?
When the 50-day moving average crosses above the 200-day moving average.