Moving Average
A rolling average of price over a lookback window, used to smooth noise and identify trend.
Simple moving average (SMA): `SMAₙ = Σ Price over last n days / n`. Exponential moving average (EMA) weights recent prices more heavily; 50-day and 200-day are the most-watched windows.
Why it matters. The 200-day SMA is the most-cited primary trend filter: above it = uptrend, below it = downtrend. Golden cross (50-day crossing above 200-day) and death cross (the reverse) are simple trend-following signals with decades of out-of-sample evidence, especially at the index level.
Pitfalls. Moving averages *lag* price by construction — the longer the window, the larger the lag. They whipsaw in ranging markets, so filter signals with regime indicators (e.g. realised vol, VIX) or volatility-scaled position sizing.
See it applied
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