Moving Averages 101: A Beginner’s Guide to Trend Trading

Jasper Osita - Market Analyst

2025-07-21 09:59:17

Goal of This Lesson

To help you understand what moving averages are - in plain English - and how you can start using them to read trends and make smarter trading decisions (without getting confused by math or formulas).

What’s a Moving Average?

Imagine price is like a heartbeat. It goes up and down all the time.

A moving average (MA) helps calm the noise.

It shows you the “average” price over the last few candles - like a smoother line that helps you see the overall direction the market is going.

If the line is going up, price is likely trending up.

If it’s going down, price is likely trending down.

If it’s flat, the market might be ranging (sideways).

Why Moving Averages Helps

As a beginner, you don’t need to predict the future.

You just need to follow where the price is already going.

That’s where moving averages help.

They show the overall direction (trend)
They act like dynamic support/resistance
They help you stay in good trades longer
They keep you from trading against momentum

A Simple Analogy: Moving Averages = Your Trading GPS

Think of the market like a road trip:

Price is the traffic (messy and unpredictable)
You are the driver
A moving average is your GPS - not perfect, but it shows you the general direction

When the MA is pointing north, you follow it. When it starts to curve south, you slow down or turn around.

What Do the Numbers Mean?

Let’s say you see a 20 EMA or a 50 SMA - what does that mean?

The number just means:

“We’re averaging the price of the last 20 or 50 candles.”

Smaller numbers (like 9 or 20) = faster, more reactive

Bigger numbers (like 50 or 100) = slower, more stable

The 2 Most Common Types of MAs (You Only Need These for Now)

1. SMA (Simple Moving Average)

Adds up past prices and divides by how many there are
Smooth, stable line
Great for seeing the big picture trend

2. EMA (Exponential Moving Average)

Gives more weight to recent prices
Reacts faster to new moves
Great for finding quick momentum changes

Beginner Tip:

Use EMA for faster trades, SMA for slower trades.

Most traders use both.

How to Use Moving Averages (Without Overthinking It)

Here’s a super simple way to start using MAs in your chart:

Step 1: Add a 20 EMA, 50 EMA, & 100 EMA to your chart

These help you see short-term and medium-term trend

Step 2: Is Price Above MA or Below?

Above? Market is likely trending up
Below? Market is likely trending down
Criss-Cross? Stay out - market might be ranging

Step 3: Use it as a guide, not a trigger

Don’t enter just because price touches the MA
Wait for a price action breakout + pullback to the MA + confirmation candle
Combine with support/resistance or structure

Common Mistake to Avoid

“Price touched the moving average… time to buy!”

Nope. That’s how beginners get trapped.

Think of MAs like a weather report.

They don’t make decisions for you - they give context.

Pro-Tip: Price action must confirm first through a breakout. Moving averages will guide the way.

Beginner-Friendly MA Settings to Start With

Type	Period	Use For
9 EMA	Fast trends	Scalping or quick moves
20 EMA	Medium trend	Day trading direction
50 SMA	Big picture	Swing trading / filter
100 SMA	Macro trend	Major support/resistance

Tip: Start with 20 EMA and 50 EMA — simple, effective, and enough.

Key Takeaways

Moving averages help you see the trend clearly
EMA = reacts fast, SMA = more stable
Start with 20 EMA + 50 EMA and just observe how price interacts with them
Use MAs for direction and confidence, not as signals alone
The goal is to trade with the trend, not against it

Final Thought

Moving averages are like your first training wheels in trading.

They won’t give you perfect signals.

They won’t predict the market.

But they will help you see the trend, follow momentum, and avoid emotional decisions.

Start simple. Watch how price respects the 20 EMA or bounces off the 50 SMA.

You don’t need to trade every move - just trade in the direction that makes sense.

Over time, you’ll learn how to combine MAs with price action, structure, and confidence.

That’s when everything starts to click.

Here’s your challenge this week:

Add a 20 EMA and 50 EMA to your favorite chart.
Spend 15 minutes each day observing how prices behave around them.
Write down what you observe - pullbacks, rejections, breakouts, or nothing at all.

You don’t need to trade yet.

Just build the eye. Train your pattern recognition. Trust the process.

Start Practicing with Confidence - Risk-Free!

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This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Penulis

Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis and of course, supported by fundamentals. He has a background in trading proprietary firms and has been teaching students how to navigate themselves in the markets from basic to advance concepts.

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Moving Averages 101: A Beginner’s Guide to Trend Trading

Goal of This Lesson

What’s a Moving Average?

Why Moving Averages Helps

A Simple Analogy: Moving Averages = Your Trading GPS

What Do the Numbers Mean?

The 2 Most Common Types of MAs (You Only Need These for Now)

1. SMA (Simple Moving Average)

2. EMA (Exponential Moving Average)

How to Use Moving Averages (Without Overthinking It)

Step 1: Add a 20 EMA, 50 EMA, & 100 EMA to your chart

Step 2: Is Price Above MA or Below?

Step 3: Use it as a guide, not a trigger

Common Mistake to Avoid

Beginner-Friendly MA Settings to Start With

Key Takeaways

Final Thought

Here’s your challenge this week:

Start Practicing with Confidence - Risk-Free!

Check Out My Contents:

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