Moving averages: SMA & EMA

A moving average smooths a noisy price series into a clearer trend line by averaging over a rolling window.

Simple Moving Average (SMA)

The average closing price over the last N periods — a 50-day SMA is just the mean of the last 50 daily closes, recalculated fresh each day as the window slides forward. Every day in the window counts equally.

Exponential Moving Average (EMA)

Also a rolling average, but it weights recent prices more heavily than older ones, so it reacts faster to new information than an SMA of the same length.

How they're used

A common read: price above its long-term moving average suggests an uptrend; below suggests a downtrend. Comparing a short and a long moving average is another classic technique — when a short-term average crosses above a long-term one ("golden cross") it's read as a bullish signal, and the reverse ("death cross") as bearish.

The limitation

Moving averages are lagging by construction — built entirely from past prices, they confirm a trend that's already underway rather than predicting the next one. In a genuinely sideways, choppy market, moving-average crossovers can fire frequently with no follow-through. This is exactly why the Quant Engine's forecast models are separately validated against a random-walk baseline, rather than trusting a moving average alone.