Moving Averages Explained: MA20, MA50, MA200 and What Price Above or Below Them Means
The average close of the last 20, 50 and 200 trading days: the short, medium and long-term trend. Price above an average means it is above its average over that period; averages always lag price.
Contents (5 sections)
A moving average is the average closing price over the last N trading days, recalculated every day. It smooths out daily noise so the direction underneath is easier to see. The three in common use each describe a different horizon.
The three horizons
| Average | Roughly | What it describes |
|---|---|---|
| MA20 | One month | The short-term trend; price crosses it often |
| MA50 | A quarter | The medium-term trend; pullbacks in a healthy uptrend often stop near it |
| MA200 | About ten months | The long-term trend; the line most often used to separate rising stocks from falling ones |
Stock Compass uses simple moving averages: every one of the N closes counts equally.
Reading them
- Price above an average means the stock is trading higher than its average over that period: buyers over that horizon are, on average, in profit.
- The distance matters as much as the side. A stock 2 percent above its 20-day average is in an ordinary uptrend; one 25 percent above it has run far ahead of itself.
- A bullish alignment is the shorter averages stacked above the longer ones, MA20 above MA50 above MA200, with price on top. It describes a trend that is up on every horizon.
- The slope of an average says whether the trend is still strengthening. A flat MA200 with price above it is weaker evidence than a rising one.
What they do not tell you
- Anything early. An average of the last 200 days turns long after price has. A cross below MA200 confirms a decline that is already well under way.
- Where price will stop. Averages are not support. Price often pauses near a widely watched average because many people act there, and often goes straight through.
- Much in a range. In a sideways market price crosses its averages constantly and every cross is a false start.
In Stock Compass
The rule indicators express distance, not just side:
- price_vs_ma20, price_vs_ma50, price_vs_ma200: how far the price is above (positive) or below (negative) that average, as a percentage. "Greater than 0" means above the average; "between 0 and 5" means above it but not stretched.
- ma5_above_ma20, ma10_above_ma20, ma20_above_ma50: true when the shorter average is above the longer one, the building blocks of an alignment.
- days_above_ma20: how many consecutive days the close has held above MA20.
MA200 needs 200 days of history, so a recently listed stock has no value and a condition on it is not met. Moving average alignment plus volume builds a complete buy rule from these pieces.
FAQ
Which moving average is the most important?
It depends on the horizon you trade. The 200-day average is the most widely used single test of a long-term uptrend; the 20-day suits short swings. Using two together, a long one for direction and a short one for timing, is common.
What is a bullish moving-average alignment?
The short average above the medium one above the long one, for example MA20 above MA50 above MA200, with price above all three. It means the trend is up on each horizon at once.
Does Stock Compass use simple or exponential moving averages?
Simple moving averages for MA20, MA50 and MA200, on daily closes. Exponential averages are used inside MACD, which has its own page.
Definition only — not investment advice.