Moving Averages: Understanding the 50, 100, and 200

When you first look at a stock chart, all you see is price bouncing up and down. It can feel random. That’s where moving averages (MAs) come in — they smooth out the noise and show you the bigger picture.

At GAR Capital, we use the 50-day, 100-day, and 200-day moving averages as some of our favorite tools. Let’s break down what they mean and how to use them.

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🧮 What is a Moving Average?

A moving average is just the average price of a stock over a certain number of days.

• 50-day MA = average closing price of the last 50 days
• 100-day MA = average closing price of the last 100 days
• 200-day MA = average closing price of the last 200 days

Every new day, the oldest day drops off, and the newest day gets added — that’s why it’s called moving.

👉 Think of it like a “rolling report card” that updates daily.

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📈 Why Moving Averages Matter

1. Trend Direction

   • If price is above the moving average, the stock is usually in an uptrend.
   • If price is below, it’s usually in a downtrend.

2. Support & Resistance

   • MAs often act like invisible “floors” (support) or “ceilings” (resistance).

3. Signals for Traders

   • Crossovers between moving averages can signal changes in trend.

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🔑 The Big Three: 50, 100, 200

50-Day MA

• Shorter-term view
• Shows the medium-term trend (about 2–3 months of trading days)
• Popular with swing traders
  👉 Example: If Apple is trading above its 50-day MA, it often means short-term momentum is bullish.

100-Day MA

• More intermediate-term
• A balance between short-term and long-term views
• Used less often but still respected
  👉 Example: If price dips to the 100-day MA and bounces, that’s a healthy sign of strength.

200-Day MA

• The big one — almost every trader and investor watches it
• Represents the long-term trend (almost a year of trading)
• When price is above, it’s considered a bullish long-term sign
• When price is below, many see it as bearish
  👉 Example: If the S&P 500 breaks above its 200-day MA, news outlets often report it as a “bullish signal.”

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⚡ Moving Average Crossovers

When shorter moving averages cross longer ones, traders take notice:

• Golden Cross: The 50-day MA crosses above the 200-day MA → Bullish signal
• Death Cross: The 50-day MA crosses below the 200-day MA → Bearish signal

They’re not perfect predictors, but they often confirm shifts in long-term momentum.

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📊 Simple Moving Average (SMA) vs. Exponential (EMA)

• SMA = simple average (all days weighted equally)
• EMA = exponential average (recent days weighted more heavily)
  👉 EMAs react faster to price changes, while SMAs are smoother and slower.

At GAR, we focus mainly on SMA 50, 100, 200, but EMAs are also widely used.

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📝 Example

Imagine Netflix stock is at $400.

• The 50-day MA is at $390 (short-term support)
• The 100-day MA is at $375
• The 200-day MA is at $350 (long-term support)

If price bounces off these averages, traders see that as confirmation of strength. If price falls below them, it may suggest weakness.

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🚫 Common Mistakes

• Using moving averages alone without context (always combine with price action).
• Expecting perfect bounces — sometimes price dips slightly below before reversing.
• Using too many MAs at once (it clutters the chart).

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🎯 Quick Takeaways

• Moving averages smooth out price action and show trends.
• 50-day = short/medium term, 100-day = intermediate, 200-day = long term.
• MAs can act as support/resistance and signal trend changes with crossovers.
• They’re powerful, but best when combined with other tools (like support/resistance or chart patterns).

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🔑 Re-read our entire Lesson Plan: Learning Center for Day Trading