Moving averages (MA) are dynamic areas of support and resistance calculated by taking an average of the closing price of last n periods, to smooth out the short term noise.
Charting softwares offer a fair amount of customization while plotting moving averages, such as taking open, high, low price instead of closing, changing the period of the calculation etc
There are even various kinds of MAs, like exponential, simple, weighted etc. Of these, simple MA & exponential MA are the most commonly used.
These averages can be plotted on any time frame. For instance, the 20SMA (20 period simple moving average when plotted on the hourly time frame is an average of the closing prices of the past 20 hours, whereas 20SMA when plotted on the monthly time frame is an average of the closing prices of the past 20 months.
The most commonly used time periods are 8, 13, 20, 50, 100 & 200. However there are a variety of other time periods that provide great results, and there’s no set formula for success.
Few tips to remember, when MAs are sloping upward, the price is said to be in uptrend. When they are sloping downward, price is said to be in downtrend. When they are flat, they are said to be sideways. Also, flat MAs don’t act as very good levels of support or resistance. The sloping ones are far more reliable in giving signals.
Moving Average Crossover/ Golden Cross/ Death Cross:
In a pair of Moving Averages (MA), the lower period MA is the Faster MA, and the one with the higher period is the Slower MA. When the faster MA crosses above the slower MA, it should be taken as a bullish hint, as it signifies that momentum is catching up. The opposite also holds true. The most common crossover is that of the 50 & 200 period MAs. The bullish crossover is termed Golden Cross, and the Bearish Crossover is termed Death Cross. See these illustrations to get a better idea:
However one must be mindful that these crossovers give plenty of fake signals and are also lagging in nature and hence should not be used in isolation, but rather in conjunction with other signals.