A moving average (MA) smooths price by averaging the last N closes. It turns a noisy chart into a single line that shows direction.

Simple versus exponential

• Simple moving average (SMA): every close in the window counts equally.
• Exponential moving average (EMA): recent closes count more, so it reacts faster.

Common lengths are 20 (short term), 50 (medium) and 200 (long term).

Three ways traders use them

1. Trend filter. Only take buys when price is above the 200 MA and the MA slopes up; only sells below a falling 200 MA. This one rule removes many trades against the tide.

2. Dynamic support and resistance. In a healthy trend, pullbacks often stall near the 20 or 50 EMA. Traders look for reversal candles there.

3. Crossovers. A fast MA crossing above a slow one signals strengthening momentum. Crossovers lag, so they work best in strong trends and produce many false signals in ranges.

Limits

Moving averages describe the past; they do not predict. In sideways markets price crosses them constantly. Combine them with structure (highs and lows) rather than trading every touch or cross.