Moving Average (MA) is a technical analysis tool that constantly averages a security’s prices over a period of time and thereby smooths out price data.

This smoothing effect of the moving average gives a clear indication of the direction of the price of the security – up or down or sideways- over a specific period of time. If the moving average curve is rising, it means price is rising; if the moving average curve is falling, it means price is falling. If the curve is directionless and moving sideways, it indicates that the market is in a range.

Moving Average Length

Commonly used moving average lengths (also called “look back periods” and “timeframes”) are 10, 20, 50, 100 and 200. When an asset begins an uptrend, short term moving averages will start rising much earlier than the long term moving averages. That is, an MA with a short timeframe will react much quicker to price changes than a long term MA.