Moving averages: seeing the trend through the noise
An average of recent prices that smooths out the noise and shows the direction of the trend.
Illustration on a made-up price series, not market data. Hypothetical, for education only.
What it measures
A simple moving average (SMA) is the plain average of the last N closes. An exponential moving average (EMA) gives more weight to recent prices, so it reacts faster.
How to read it
Price above a rising average suggests an uptrend, price below a falling one a downtrend.
A fast average crossing above a slow one is often called a bullish crossover (the Golden Cross uses the 50 and 200 period averages); crossing below is a bearish crossover.
Averages lag: they confirm a move after it has started.
A common mistake
Expecting crossovers to work in sideways markets. There the averages cross back and forth and every signal loses a little to fees.
Check yourself
Try it
Run the Golden Cross and Fast EMA Crossover templates on the same asset and period and compare how many trades each makes.