Guide
Reading distance from price without inventing magnets
Price can travel far from an average without being “due” to return. Distance is information about stretch, not a promise of mean reversion.
Traders often say price is “extended” from the 20-day average and therefore must snap back. Sometimes it does. Sometimes the average simply climbs toward price while the trend continues, and the trader who faded the stretch funds someone else’s trend-following exit.
What distance can tell you
Distance describes how unusual the current displacement is relative to recent history. We have students measure today’s distance against a rolling median of distances. Extremes are flags for caution — position size, trailing logic — not automatic fade signals.
Classroom language we discourage
“The average will pull price back.” An average has no magnetism. It is a trail of past closes. If you want a mean-reversion strategy, define it with ranges, volatility bands, or other tools — and still treat the moving average as context, not a spring.
Clear language keeps interpretation honest. That honesty is the point of our technical analysis training on moving averages.