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The foundation of trend analysis - smoothed price over time
A Moving Average (MA) is a calculation that smooths price data by averaging the closing prices over a specified number of periods. The result is a flowing line that filters out noise and reveals the underlying trend direction.
Moving averages are lagging indicators - they tell you what has happened, not what will happen. This isn't a weakness; it's their purpose. They're designed to confirm trend direction, not predict reversals.
Three core uses: (1) Trend direction - price above MA is bullish, below is bearish. (2) Dynamic support/resistance - MAs often act as bounce points. (3) Crossover signals - when faster MAs cross slower MAs.
Key Signals 1 Price vs MA PRICE ABOVE = BULLISH Simplest signal: Price above MA = bullish bias. Price below MA = bearish bias. The longer the period, the more significant the signal.
GOLDEN CROSS Golden Cross: 50 MA crosses above 200 MA (bullish). Death Cross: 50 MA crosses below 200 MA (bearish). Significant but lagging.
Bounce trading: In uptrends, price often pulls back to key MAs (20, 50) and bounces. These become entry points for trend continuation trades.
STACKED = STRONG TREND Multiple MAs stacked: When several MAs are aligned (e.g., 10 > 20 > 50 > 200), the trend is strong. Compression signals potential breakout.
The 200 MA on the daily chart is the single most-watched level in any market. Price above it = bull territory, below = bear territory. When in doubt about the trend, check the 200 MA first.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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