Moving Averages on the CMT Exam
Moving averages are the most fundamental technical indicator and appear across all three CMT levels. They smooth price data to reveal trends and generate trading signals.
For topic weights, see the CMT exam guide 2026.
Simple Moving Average (SMA)
Formula: SMA = (P₁ + P₂ + ... + Pₙ) / n
- Equal weight to all data points
- More stable but slower to react
- Key periods: 20 (short-term), 50 (medium), 200 (long-term)
Exponential Moving Average (EMA)
Formula: EMA = (Price × k) + (Previous EMA × (1 − k)), where k = 2 / (n + 1)
- More weight to recent prices
- Faster reaction to price changes
- Used in MACD calculations (12 and 26 EMA)
Key Moving Average Signals
Golden Cross
50-day SMA crosses above 200-day SMA → bullish signal Historically precedes sustained uptrends.
Death Cross
50-day SMA crosses below 200-day SMA → bearish signal Often precedes extended downtrends.
Price Crossover
Price crossing above/below a moving average signals trend change:
- Above 200-day SMA = long-term uptrend per Dow Theory
- Below 200-day SMA = long-term downtrend
Moving Average as Support/Resistance
- In uptrends, the 20-day or 50-day SMA often acts as dynamic support
- In downtrends, they act as dynamic resistance
- Combine with chart patterns for confluence
Moving Average Envelope & Bands
- MA Envelope: Fixed percentage above/below MA
- Bollinger Bands: 2 standard deviations above/below 20 SMA
- Keltner Channels: ATR-based bands
Choosing the Right Period
| Timeframe | Period | Use Case |
|---|---|---|
| Short-term | 10–20 | Day trading, swing trading |
| Medium-term | 50 | Position trading |
| Long-term | 100–200 | Trend identification |
The shorter the period, the more responsive but also more false signals.
Practice MA questions with our test bank. Complete guide: CMT exam 2026.
SMA vs. EMA — Responsiveness to Price Changes
EMA reacts faster to price changes than SMA due to exponential weighting