Lesson 1 of 7 · Indicators
Moving averages
A moving average is price, smoothed.
It averages the last N closing prices into one line. Standard levels traders watch: the 20 (short-term momentum), the 50 (intermediate trend), and the 200 (multi-month picture). Price above those lines in rising order is the simplest definition of an uptrend.
Price above a rising line.
The 8-candle average is a moving average drawn on the chart. When price holds above a rising line, buyers have controlled recent closes. Pullbacks to that line are where trend traders look for entries.
Averages lag by design.
The line is built from past closes, so it always reacts after the move. A 200-period average reflects the last 200 sessions. By the time it turns up, a lot has already happened. Use averages to define the trend, not to predict when it starts.
Price has been below a falling 50-period average for three weeks. What does that tell you?
Show the answer
A. Sellers have controlled the last 50 closes. A falling 50-period average means closing prices have trended lower across 50 sessions. That describes a downtrend, not a bottom signal.