Reading the chart

Moving averages (MA20, MA50, MA200): seeing the trend

Day to day, prices jump around. A moving average smooths out that noise so you can see the direction underneath. The MA20, MA50 and MA200 buttons on the chart each draw one.

How it's calculated

The MA20 is the average closing price of the last 20 candles. Tomorrow the oldest day drops out and the newest one comes in, so the average "moves" along with the chart. The MA50 and MA200 do the same over 50 and 200 candles. On the daily views that means roughly one month, one quarter and one year of trading.

Equinor over a year with all three averages on. The short MA20 hugs the price; the long MA200 barely bends.

Tip: The averages use whatever candles the chart shows. On the 1D view, the MA20 is the average of the last 20 five-minute candles, not 20 days.

Reading the lines

• Direction: an average that slopes up means the price has been rising over that period; one that slopes down means it has been falling. A flat line means no clear trend.
• Price above or below: a price above its MA50 has been stronger than its recent past; below it, weaker. Many traders use the MA200 as the line between a stock in a long uptrend and one in a long downtrend.
• Short vs long: the MA20 reacts quickly and shows the short-term move; the MA200 reacts slowly and shows the big picture. When they point in different directions, the short-term move is going against the long trend.

Crossovers

When a shorter average crosses above a longer one, the recent prices have overtaken the older ones. The best-known example is the MA50 crossing above the MA200, nicknamed a golden cross; the opposite, crossing below, is a death cross. They get a lot of attention in the news, but they confirm a trend that has already happened more than they predict a new one.

Support and resistance

Because so many traders watch the same averages, prices sometimes pause or turn when they reach one. A falling stock that bounces off its MA200 is said to find support there; a rising stock that stalls at it meets resistance. Sometimes it works, often the price just cuts straight through.

Try it

Open Equinor with the averages on

Look for the moments when the price crossed its MA50. How long did the move last afterwards? Then try a stock that has risen strongly this year and compare how far its price is above the MA200.

Where it misleads

A moving average is built from past prices, so it always lags: by the time it turns, a good part of the move is already over. In a sideways market the price crosses its averages back and forth, and every crossover is a false signal. Use averages to describe the trend, not to time the exact day to buy or sell.

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