Moving Average

A moving average takes a stock's closing prices over a set number of recent periods — say 20 or 50 days — and averages them into one number that updates as each new period closes and the oldest drops off. The result is a smoother line that filters out day-to-day noise and makes the underlying trend easier to read. A shorter average reacts faster and tracks price more closely; a longer one is smoother but lags further behind. Traders watch where price sits relative to a moving average, and watch for a shorter average crossing a longer one — a cross above is often read as bullish, a cross below as bearish — but since it's built entirely from past prices, it always lags and can't anticipate a sudden reversal.