What it means
An SMA weights every candle equally; an EMA favours recent candles and reacts faster. Uses: trend filter, dynamic support, crossovers.
Example
Closes 10, 12, 14, 16, 18: the 5-period SMA is 14.
In practice
A moving average turns noisy price into a smooth line, which makes direction easy to see: price above a rising average is an uptrend by that measure. The 20, 50 and 200-period averages are the most widely followed.
Traders use them as a filter (only take longs above the 200), as moving areas of support in a trend, and to judge how stretched price is from its recent average.
What to watch for
An average is calculated from past prices, so it turns after price does. In a range price cuts through it repeatedly and every cross is a false signal. No particular length is special; levels work partly because many traders watch the same ones.