Intermediate · Lesson 3 of 9

Moving averages: 50-day, 200-day, golden and death crosses

7 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

A simple moving average (SMA) is the average closing price over a number of days. The 50-day shows the medium-term trend and the 200-day the long-term trend. An exponential moving average (EMA) weights recent prices more, so it reacts faster.

Price above a rising 200-day average is widely treated as a long-term uptrend. A golden cross is when the 50-day crosses above the 200-day; a death cross is the opposite. They are slow signals that confirm a trend rather than predict it, and they whipsaw in sideways markets.

A classic trend-following rule (studied by Meb Faber and others) is to hold an index when it is above its 10-month average and move to cash when below. It has historically reduced deep drawdowns but at the cost of many small false exits.

Formula

SMA(n) = (P1 + P2 + ... + Pn) / n
EMA_t = α x P_t + (1 - α) x EMA_(t-1), α = 2 / (n + 1)

Key takeaways

50-day = medium trend; 200-day = long trend.
Crosses confirm trends late and whipsaw in ranges.
Moving-average rules mainly reduce big drawdowns.

Check your understanding

1. A "golden cross" is when...

Price hits a record high
The 50-day average crosses above the 200-day
Gold rises above $3,000
RSI goes above 70

Show the answer

The 50-day average crosses above the 200-day. Short average crossing above the long average.

2. Main weakness of moving-average signals?

They are too fast
They lag and whipsaw in sideways markets
They need options
They only work for bonds

Show the answer

They lag and whipsaw in sideways markets. Averages are lagging by design.

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General education only, not financial advice. Examples are illustrations. Rules, tax settings and products change; check official sources.