Moving averages: SMA, EMA and the 20/50/200 periods

Simple and exponential

The simple moving average (SMA) is the arithmetic mean of the last n closing prices: each day has the same weight. The exponential moving average (EMA) gives more weight to recent prices, so it reacts faster to a change of direction — at the cost of more false signals.

SMA(n) = (C₁ + C₂ + … + Cₙ) / n
EMA today = price × k + EMA yesterday × (1 − k), with k = 2 / (n + 1)

The 20, 50 and 200 periods

• 20 follows the short-term movement — roughly a month of trading days.
• 50 describes the intermediate trend.
• 200 is the long-term reference followed by many market participants: a price above its 200-day average is commonly described as in a long-term uptrend.

Crossovers: golden cross and death cross

When the 50-period average crosses above the 200, it is called a golden cross; the opposite is a death cross. These names are popular in the media, but the signals arrive late — by construction, the averages cross after a large part of the movement. Their main value is to confirm a change of regime, not to time it.

Dynamic support and resistance

In a steady trend, the price often returns to its 20- or 50-period average before continuing. The average then acts as moving support (or resistance in a downtrend). The slope matters as much as the position: a flat average under a price that oscillates around it simply describes a range.

Moving averages in InvestAI

InvestAI offers the SMA 20, 50 and 200 and the EMA, and indicates for each whether the price is above or below and what that implies. A long-term horizon requires a long history: when a market does not provide enough data for a 200-period average, the app says so rather than showing a truncated figure.