Simple moving average

What the numbers mean

The number is the lookback — how many completed bars get averaged. A 20 covers about a month of daily trading, a 50 a quarter, a 200 roughly a trading year, and the longer the setting the smoother the line and the later it turns. It counts bars of whatever timeframe the chart is on, so a 20 on a five-minute chart is 100 minutes, not 20 days.

• 9 or 10 — about two weeks of trading; the fast line on intraday and swing charts
• 20 — roughly one calendar month (there are about 21 trading days in a month); the standard short-term trend line
• 50 — about a quarter, or ten weeks; widely treated as the line that separates a healthy pullback from a broken trend
• 100 — about five months; the middle ground most often used on weekly charts
• 200 — roughly one full trading year (252 sessions, so the 200 covers about ten months); the single most-watched line in the market

How it is used

Read as a trend gauge and a rough shelf of support or resistance: price holding above a rising average is the textbook uptrend. Crossovers between a fast and a slow setting are the classic signals — the 50 crossing above the 200 is the so-called golden cross, the reverse the death cross.

• Price above a rising average → uptrend; price below a falling one → downtrend
• Price returning to the 20 or 50 in an uptrend → the classic “buy the dip” reference point
• The average flattening out → the trend is stalling, regardless of which side price is on
• How far price sits above the average → how stretched the move is

How it relates to everything else

The standard pairs are chosen to compare meaningfully different horizons: 20 against 50 asks whether the last month has outrun the last quarter, and 50 against 200 asks whether the last quarter has outrun the year. When all three stack in order — 20 above 50 above 200, every line sloping up — traders call the trend fully aligned, and that configuration is what most trend-following systems are waiting for; the same stack inverted is the cleanest definition of a bear phase. Note that the 200-day average is also a self-fulfilling level to a degree, since a very large number of desks act on the same line.

• 20 crosses above 50 → short-term momentum turning up, often weeks before the longer trend confirms
• 20 crosses below 50 → momentum cooling; the first warning inside an uptrend
• 50 crosses above 200 → the golden cross, the headline long-term bullish signal
• 50 crosses below 200 → the death cross, its bearish counterpart
• 20 > 50 > 200, all rising → fully aligned uptrend; the reverse stack is a fully aligned downtrend
• Pair with ADX above 25 to confirm a crossover is happening in a trending market, not a range

What to watch for

It lags by roughly half its lookback, and in a sideways market crossovers whipsaw relentlessly. The averages that appear to act as support do so largely because enough traders are watching the same conventional numbers.