TRADING GLOSSARY

Moving average: the simplest and most powerful trend indicator

A moving average smooths price data into a single flowing line by calculating the average price over a specified number of periods. It is the most fundamental and widely-used technical indicator, serving as dynamic support/resistance and a trend direction filter.

SMA vs EMA

The Simple Moving Average (SMA) weights all periods equally. The Exponential Moving Average (EMA) gives more weight to recent prices, making it more responsive. Most traders prefer EMAs for short-term analysis and SMAs for longer-term analysis.

Key periods

20-period: Short-term trend. Used by swing traders. Acts as dynamic support in strong trends. 50-period: Medium-term trend. Institutional traders watch this closely. 200-period: Long-term trend. The most watched moving average in the world. Price above the 200 MA = long-term uptrend. Below = downtrend.

Trading signals

Golden cross: 50 MA crosses above the 200 MA — a major bullish signal. Death cross: 50 MA crosses below the 200 MA — a major bearish signal. Price bouncing off a moving average confirms the trend and provides an entry opportunity. Multiple moving averages fanning in one direction (e.g., 20 above 50 above 200) confirms a strong trend.

AskTrade’s Technical Analysis Agent evaluates multiple moving average configurations across all timeframes.

Disclaimer: This is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss.

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AskTrade analyses are AI-generated and do not constitute financial advice.