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What is a moving average?

A moving average is the average of an asset's recent closing prices over a fixed number of periods, recalculated each period so the line moves along with the chart. It smooths out day-to-day swings to show the general direction prices have taken.

What it means for you

A moving average describes past prices and does not tell you what happens next. It always lags: by the time it turns, much of the move has happened. Crossover signals, where a short average crosses a long one, can flip back and forth in a sideways market, and each false signal can cost trading fees.

How it works

A simple moving average adds the last N closing prices and divides by N. An exponential moving average gives more weight to recent prices, using a smoothing factor of 2 divided by N plus 1, so it reacts faster. In a crossover strategy, a short average, such as 5, 10 or 25 days, is compared with a long one, such as 50, 100 or 200 days; when the short crosses above the long, analysts read upward momentum. A crossover lags more than a single average but reacts less to every change in direction.

An example

Say a coin closed at $10, $12, $11, $13 and $14 over five days. The 5-day simple moving average is $60 divided by 5, or $12. Next day it closes at $16; the oldest price drops out and the average becomes $13.20.

Sources: Deep et al.: Assessing the Impact of Technical Indicators on Machine Learning Models for Stock Price Prediction (arXiv, v1), Ma, Ventre and Polukarov: Denoised Labels for Financial Time-Series Data via Self-Supervised Learning (arXiv) · checked 4 October 2026

Related words

Technical analysisMACDRSIVolatility

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