What Is Moving Average?

A moving average is a technical indicator that smooths out price data by calculating the average price over a specific number of periods. A 50-day moving average, for example, plots the average closing price of the last 50 trading days. As each new day passes, the oldest day drops off and the newest day is added, so the average "moves" over time.

There are two main types: Simple Moving Average (SMA), which gives equal weight to all periods, and Exponential Moving Average (EMA), which gives more weight to recent prices and reacts faster to new information. The 50-day and 200-day moving averages are the most widely followed because institutional investors use them as key reference points.

When a shorter moving average crosses above a longer one (such as the 50-day crossing above the 200-day), it is called a "golden cross" and is considered a bullish signal. When it crosses below, it is called a "death cross" and is considered bearish. These crossovers generate some of the most watched signals in all of technical analysis.