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The 200-day moving average, explained
The 200-day moving average is one of the most watched lines in investing. It shows a stock's average closing price over roughly the last ten months of trading, and many investors use it as a simple way to describe the long-term trend. This guide explains what it is, what a "crossover" means, and why crossovers often mislead.
What the 200-day average is
Add up a stock's closing prices for the last 200 trading days and divide by 200. Tomorrow, drop the oldest day and add the newest. Plotted on a chart, this creates a slow-moving line that smooths out daily ups and downs. The 50-day moving average works the same way over about ten weeks, so it reacts faster.
For the basic idea of averages, start with our moving averages guide.
Price above or below the line
- Price above a rising 200-day average is commonly described as a long-term uptrend.
- Price below a falling 200-day average is commonly described as a long-term downtrend.
- Price chopping back and forth around a flat average suggests no clear trend.
These are descriptions of what the price has done, not predictions.
What a crossover is
A crossover happens when the price closes on the other side of the average from where it was the day before. For example, a stock that closed below its 200-day average yesterday and above it today has "crossed above" it. StockSignalCheck's free email alerts notify you when a stock you follow does this for its 50-day or 200-day average.
Investors watch these moments because they mark a change in the price's relationship to its longer-term trend. A cross above can be an early sign that a decline has ended; a cross below can be an early sign that a rise is fading.
Golden cross and death cross
These dramatic-sounding names describe the two averages crossing each other:
- Golden cross: the 50-day average rises above the 200-day average.
- Death cross: the 50-day average falls below the 200-day average.
They get lots of headlines, but by the time they happen the price has usually already moved a long way, because both lines are built from past prices.
Why crossovers can mislead
- They lag. A 200-day average is slow by design. By the time price crosses it, much of the move may be over.
- Whipsaws. When a stock moves sideways, it can cross its average up and down repeatedly in a few weeks. Each cross looks like a signal; most mean nothing.
- They ignore the business. A crossover says nothing about earnings, debt or valuation. See momentum vs value.
- No rule works every time. Studies of simple moving-average rules show mixed results, and results that look good in the past often weaken once trading costs and taxes are included.
How people use it sensibly
- As context: is this stock in a long-term uptrend or downtrend right now?
- As a prompt to look closer: a cross is a reason to check the news and the company's results, not an instruction to trade.
- Alongside volatility: a crossover in a very volatile stock is less meaningful. See stock volatility explained.
Where to see it
Most charting tools let you add 50-day and 200-day averages. On StockSignalCheck, you can set up free alerts so you hear about crossovers on the stocks you follow, then open the stock page to see the chart and scores.
Keep learning
This guide is for education only. It isn't personalized financial, investment or tax advice, and nothing here is a recommendation to buy or sell any security. Investing involves risk, including the possible loss of your money.