SMA vs EMA
A simple moving average (SMA) weights every period in the lookback equally. An exponential moving average (EMA) weights recent prices more heavily, so it turns faster after a change in direction.
The trade-off is fixed: EMAs react sooner and produce more false signals; SMAs lag more and filter better. Neither is superior — they answer slightly different questions.
The periods people actually watch
These levels matter partly because they work and largely because so many participants watch them, which makes the reaction self-reinforcing.
- 20: short-term trend, common as dynamic support in an active move.
- 50: the medium-term trend most swing traders reference.
- 100: an intermediate filter between swing and position views.
- 200: the long-term regime line; above it is broadly bullish, below it broadly bearish.
Crossovers and their weakness
A golden cross is the 50 crossing above the 200; a death cross is the reverse. Both are widely reported and both are lagging by construction — the cross confirms a move that has already happened. They are useful as regime filters and poor as entry timers.
A 50-day SMA crossing above the 200-day typically occurs well after the low. Traders using it as a regime filter stay long while it holds; traders using it as an entry buy the move late.
Where moving averages fail
In a sideways market, price oscillates across the average continuously and every crossover is a whipsaw. Moving averages are trend tools. Applied to a range, they generate losses at a steady rate — which is why identifying the regime comes before choosing the indicator.