Understanding Moving Averages

Start With Daily Candlesticks

Each candle shows one trading day’s open, high, low, and close.

The body shows the open and close. The wick shows the day’s high and low.

A stock chart contains a great deal of daily movement. Moving averages smooth that movement so the broader price structure is easier to see.

They describe recent price behavior; they do not predict the next move.

Follow the Closing Price

Connect each day’s closing price to trace its daily path.

Keeping only each day’s closing price produces a one-day moving average: the daily closing-price line. It does not smooth the data yet.

Add the 50-Day Moving Average (MA50)

The 50-day average smooths daily movement to reveal the broader trend.

The 50-day moving average is the average closing price across the most recent 50 trading days.

Trading above it indicates that the current price is stronger than its average over roughly ten trading weeks; it does not guarantee gains.

Add the 21-Day Moving Average (MA21)

The 21-day average responds faster, showing how recent momentum is changing.

The 21-day average covers about one trading month.

When MA21 is above MA50, recent price behavior is stronger than the longer-term average. A cross below it shows weakened recent momentum.

Add the 9-Day Moving Average (MA9)

The fastest average helps reveal stacking and fanning.

The 9-day average reacts most quickly. TickerScope calls it Fanning when the averages are rising, organized, and spreading apart.

Stacking tells us the order. Fanning tells us whether that order is also rising and expanding.

Put the Moving Averages Together

Cross Hairs brings the averages and their changing gaps into one view.

The lines show MA9, MA21, and MA50; the bars measure the gap between MA9 and MA21 and whether it is widening or narrowing.

Moving Averages: What to Remember