The average price of a security over a specified number of periods — a trend-smoothing tool that separates signal from noise in price action.
Deeper Explanation
The 50-day and 200-day moving averages are the most widely watched trend indicators. When a stock's price is above its 200-day MA, the long-term trend is up; below suggests a downtrend. The "golden cross" (50-day crossing above 200-day) is a bullish trend confirmation signal; the "death cross" (50-day crossing below 200-day) is bearish. Moving averages are lagging indicators — they confirm trends rather than predict them. Momentum investors use MAs as dynamic support/resistance levels: a stock pulling back to its rising 50-day MA and bouncing is showing trend strength; one breaking below its 200-day MA is showing trend breakdown.
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