A moving average (MA) calculates the mean closing price of an asset over a rolling window of periods — say, the last 50 days or 200 days. Because it is updated each session, it "moves" with price while filtering out the day-to-day noise that makes raw price charts hard to read.
Traders and analysts use moving averages to identify the prevailing trend: when price is above its MA the trend is up, when below it is down. The length of the window controls the trade-off — shorter windows respond faster but generate more false signals; longer windows are smoother but slower to react.
Moving averages are the foundation of many mechanical timing strategies. They underpin crossover signals (the Golden Cross and Death Cross), serve as dynamic support and resistance levels, and feed into indicators like the MACD. Understanding their inherent lag is critical to avoiding over-confidence in the signals they produce.