Some investors use the 200-day simple moving average (alternatively the 40-week or 10-month average) as a primary trend line indicating an upward or downward moving market.  Some also use it as a reference line around which the price or other moving averages oscillate.

It is easier to be motivated to be in a risk asset when the primary trend line is moving up than when it is moving down.  Conversely, it is probably prudent to limit risk commitments when the primary trend line is moving down, even when other fundamental or technical factors suggest opportunity.

There is no magic to 200-days, but it is probably most widely used, making it likely that large numbers of investors will be responsive to it.  Other longer or shorter periods may “fit” better with different securities which have different cycle characteristics.

Keep in mind that longer averages are slower to recognize changes in the trend, but present