GLOSSARY // Technical Analysis
Moving Average
A moving average is the average closing price of a security over the last N periods, recalculated as each new period completes so the value rolls forward with the chart. It smooths bar-to-bar noise into a single line that shows the direction and rough slope of the trend.
The smoothing has a cost: lag. A 200-day average barely bends when a stock drops 10% in a week, while a 10-day average tracks the move almost immediately. Traders pick lengths to match their horizon: 9 and 20 for short-term momentum, 50 for the intermediate trend, 200 for the long-term regime. Price holding above a rising 50-day is a common trend-health check, and widely watched averages can act as support or resistance simply because so many participants react to them.
The two standard flavors are the simple moving average, which weights every close equally, and the exponential moving average, which weights recent closes more heavily.
A stock trades at 112 with its 50-day moving average at 108 and rising about 0.30 per day. A three-day pullback tags 108.40, holds, and the stock resumes to 118. The average did not cause the bounce, but enough traders watched the same line that their bids landed in the same place.
Put it to work
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.