It is a popular belief among some traders that price will always return to the moving average. After all, many trading strategies are built around the idea of price “reverting to the mean.” While it is true that prices often move back toward a moving average after extended trends or sharp moves, it is a dangerous oversimplification to assume they always do.

Let’s explore the reality behind moving averages, mean reversion, and when price might not behave as expected.

Understanding Moving Averages in Trading

Moving averages are one of the most widely used technical indicators. They smooth out price action to help traders identify trends and potential support or resistance zones.

Key types of moving averages include:

• Simple Moving Average (SMA): An average of the last ‘n’ closing prices.
• Exponential Moving Average (EMA): A weighted average that gives more importance to recent prices.

Traders often use moving averages to:

• Identify the overall trend direction
• Find dynamic support and resistance
• Spot potential entry or exit points based on crossovers or bounces

However, moving averages are lagging indicators — they reflect what has already happened, not what will happen.

Why Price Often Returns to the Moving Average

There are several reasons why price tends to gravitate back toward a moving average:

• Market equilibrium: After extreme moves, markets often seek a balance between buyers and sellers.
• Profit-taking: After strong trends, traders often close positions, leading to retracements.
• Overbought/oversold conditions: Technical indicators like RSI sometimes align with moving average pullbacks.

This tendency is known as mean reversion, and it happens frequently — but not predictably every time.

When Price Does Not Return to the Moving Average

Believing that price must return to the moving average can lead to costly mistakes. In strong trends, price can:

• Stay extended: In powerful moves, price can ride far above or below a moving average for days, weeks, or even months.
• Shift to a new equilibrium: After a major breakout, a new trend may form without a return to previous moving average levels.
• Accelerate away: High-impact news or fundamental shifts can cause prices to move aggressively without looking back.

Examples include:

• Strong bull markets where price stays above the 50-day or 200-day moving averages for months.
• Sharp breakdowns during market crashes, where moving averages fail to act as support.

In these scenarios, waiting for price to “come back” to a moving average can leave traders stuck holding losing positions.

How to Use Moving Averages Properly

Smart traders use moving averages as guides, not guarantees. They:

• Combine moving averages with price action: Look for candlestick patterns, volume confirmations, or momentum indicators.
• Recognise market context: In strong trends, expect moving averages to lag rather than immediately attract price.
• Use multiple timeframes: A moving average on the daily chart may behave very differently from one on the 5-minute chart.
• Set clear risk management rules: Never assume price will revert — always plan for the possibility it will not.

Moving averages are useful tools but must be applied with flexibility and caution.

Conclusion: Price Does Not Always Return to the Moving Average

In conclusion, price does not always return to the moving average. While mean reversion is a common phenomenon, strong trends, fundamental changes, or high-volatility events can cause price to diverge from moving averages for extended periods. Moving averages should be seen as dynamic guides to market behaviour, not rigid targets. Successful traders use them wisely, in combination with broader market context and disciplined risk management.

If you want to master how to use moving averages properly in your trading strategies, explore our Trading Courses and develop a professional-level approach to technical analysis.