Moving average
The average price over a set number of periods, plotted as a line to smooth out noise and show trend direction.
In practice
Many traders only buy when price is above the 200-day moving average and only sell when it is below, using it as a simple trend filter.
Common mistake
Treating crossovers as precise signals. Moving averages lag, so crossovers often come late in a move.
Related terms
Trend
A sustained directional move: higher highs and higher lows in an…
Exponential moving average (EMA)
A moving average that weights recent prices more heavily, so it…
Golden cross
When a shorter moving average, often the 50, crosses above a…
Simple moving average (SMA)
The plain average of closing prices over a set number of periods.
Trend following
Trading in the direction of the prevailing trend and staying in…
Average daily range (ADR)
The average distance in pips between each day’s high and low over…