Glossary term
Moving Average
A moving average smooths price into a single trend line. The Simple Moving Average (SMA) weights every bar in the window equally; the Exponential Moving Average (EMA) weights recent bars more heavily and reacts faster. The 20/50/200-day windows are the standard short/intermediate/long-term reads; every moving average lags price by construction.
SMA vs. EMA vs. Weighted Variants
The Simple Moving Average (SMA) is the arithmetic mean of closing price over N bars — every bar in the window counts equally, so a single large outlier can visibly bend the line as it rolls off the back of the window. The Exponential Moving Average (EMA) instead applies a smoothing constant that weights recent closes more heavily and older ones progressively less, so it tracks price more closely and reacts faster to new information. The Weighted Moving Average (WMA) and Double Exponential Moving Average (DEMA) sit further along the same spectrum — DEMA in particular is constructed specifically to cut the lag of a standard EMA, at the cost of more noise. Closelook's terminals default to the SMA family for the 20/50/200 windows and offer EMA as a toggle.
What the Common Windows Proxy
The 20-day average approximates roughly one trading month and is read as the short-term trend; the 50-day approximates one quarter and is the standard intermediate-term line, the one referenced in Golden Cross and Death Cross signals; the 200-day approximates roughly one trading year and is the most widely watched long-term trend proxy on any liquid instrument. None of the three windows derives from a theoretical optimum — they persist because enough market participants watch them that they become somewhat self-fulfilling, a dynamic documented in trend-following literature.
Filter, Not Signal — and the Cost of Lag
A moving average's primary use is as a filter: is price above or below the line, is the line itself rising or falling. Read this way it defines the prevailing trend rather than timing an entry. Every moving average is a lagging construction by definition — it can only be computed from past closes — so any signal built directly from an MA crossing price, or from two MAs crossing each other, arrives after the move has already started. That lag is the structural cost of the smoothing that makes the tool useful in the first place, and it is why MA-based rules whipsaw in range-bound tape.