Moving Average
A continuously updated average of a security's price over a set lookback period, used to smooth short-term noise and identify trends.
What is Moving Average?
A moving average is a technical indicator calculated by averaging a security's price over a specified number of periods and recalculating continuously as new data arrives. It smooths out short-term price fluctuations to reveal the underlying trend direction. The two most common types are the simple moving average (SMA), which weights all periods equally, and the exponential moving average (EMA), which weights recent prices more heavily. The 50-day and 200-day SMAs are the most widely followed on equity charts. A golden cross — when the 50-day SMA crosses above the 200-day SMA — is interpreted as a bullish signal, while a death cross — when the 50-day falls below the 200-day — is considered bearish.
Example
In early 2023, the S&P 500 Index formed a golden cross when its 50-day moving average crossed above its 200-day moving average for the first time since early 2020. Technical analysts flagged this as a potential trend reversal signal after the prolonged 2022 bear market. The index went on to gain roughly 25% over the following 12 months, though market analysts emphasize that no single indicator can reliably predict future returns.
Source: Investopedia — Moving Average