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Moving Average (MA) is a basis of technical analysis. It is a calculation to analyze data points by creating a series of averages of different subsets of the full data set and it is commonly used with time series data to trail the previous price action of an asset, assessing the history of market movements. MA can reflect the average cost of all transactions in the market during a certain period of time in the past. Traders can determine possible future patterns through difference between the latest price and the history of market movements. 

MA is a kind of arithmetic average, which is just a straight calculation of the mean price of a set of values over a given time periods. The period selected depends on the type of movement of interest, such as short, intermediate, or long-term. Moving Average levels enable you to examine as support in a falling market or resistance in a rising market.

You can examine the market through MA as following:

1. MA reflects the average cost of market, you can know your cost is cheaper than the market price or not. 

2. According to MA levels, you can determine possible future patterns.

3. MA can be regarded as smoothing the data which filters higher frequency components without any specific connection to time.

MA represents the average transaction cost in the market over the past period of time so time-frame is a variable, which can be defined according to the investment market strategy and the characteristics of different financial assets. Calculating an MA requires a certain amount of data, which depends on the length of the moving average. For instance, a five-day MA will require five days of data, while a 84MA will require 84 days’ worth. 

How to determine the trend by MA?

We usually set at least two moving averages, one with a short  cycle and one with a long  cycle.

Short cycle: 5 MA, 7 MA, 14 MA… (It commonly refers to under two weeks.)

Long cycle: 20 MA, 60 MA, 84 MA, 200 MA...(It commonly refers to over two weeks.)

There is an advantage by setting a long and short two-cycles at the same time. You can observe what has been changed in the market recently and determine the buying and selling signals. Due to you can regard the price line as a MA, you can also set only one moving average and observe the relativity between the MA and the price line. 

The following are some common determine criteria in the market:

The golden cross is a chart pattern in which a relatively short-term moving average crosses above a long-term moving average. The golden cross indicates a bull market on the horizon and can be a buying signal. 

The death cross is a technical chart pattern which a relatively short-term moving average crosses below its long-term moving average. It indicates the potential for a major sell-off. 

Other patterns: When price>short moving average>long moving average and all of them are going up, it means a long market( a bull market). On the contrary, when price <short moving average <long moving average and all of them are going down, it means a short market( a bear market).

Above four patterns can be as a reference for determining market trend. They are generally used as a technical analysis for investment strategy.