Please rotate your device
Eyrie on mobile is designed for portrait mode only.
Advertisement
Technical analysis
Advertisement
Daily prices are noisy. A moving average replaces each day's price with the average of the last N days, so the line moves more smoothly and the direction of the trend is easier to see.
A 50-day moving average, for example, averages the last 50 closing prices and shifts forward one day at a time. The longer the period, the smoother the line and the slower it reacts.
Neither is better. The SMA is steadier and fewer false alarms; the EMA is quicker but gets whipsawed more in sideways markets.
There is nothing magical about the numbers, but many traders watch the same ones, which is why they often act as reference levels:
Advertisement
When a faster average crosses above a slower one (for example the 50-day above the 200-day, a "golden cross"), it suggests momentum is turning up. The opposite is a "death cross".
Crossovers are lagging signals: by the time they appear, a good part of the move has often happened. In a choppy, sideways market they flip back and forth and generate losses.
Use moving averages to describe the trend, not to predict it. A simple routine is to check whether price is above its 50- and 200-day averages and whether the averages themselves are sloping up.
You can see these on the chart in Stock Analysis, and the Screener lets you look for stocks by trend and volume. Combine them with volume and support or resistance rather than using one signal alone.
This is educational content, not investment advice. Indicators describe past prices and can be wrong.
Neither is better. The 50-day shows the medium-term trend and reacts faster. The 200-day shows the long-term trend and gives fewer false signals but reacts slowly.
A golden cross is when the 50-day average moves above the 200-day average, and a death cross is the reverse. Both lag the price and can give false signals.
An SMA weights every price in the period equally. An EMA weights recent prices more, so it reacts faster to new moves.
Advertisement
Get the Android app to manage holdings, trades and market research in one place.
