Simple Moving Average
SMA
The Simple Moving Average (SMA) is the most basic trend indicator. It smooths price data by calculating the average closing price over a specified number of periods. SMAs help identify trend direction and potential support/resistance levels.
Interactive Chart
117.58Parameters
Number of periods to average. Common: 20, 50, 200.
Quick Answer
Average of closing prices over a specified period. A moving average smooths price fluctuations to reveal the underlying trend. The SMA gives equal weight to all prices in the period.
Trading Signals
Golden Cross
Bullish50 SMA crosses above 200 SMA
Death Cross
Bearish50 SMA crosses below 200 SMA
Price Above MA
BullishPrice trading above moving average
Price Below MA
BearishPrice trading below moving average
What is a Moving Average?
How to Read Moving Averages
When price is above the MA, the trend is generally bullish. When below, bearish. The slope of the MA shows trend strength. Multiple MAs can show trend at different timeframes - when faster MAs are above slower MAs, it's bullish (stacking).
Trading Signals
Key signals include: Price crossing the MA (trend change), MA crossovers (Golden Cross: 50 crosses above 200, Death Cross: opposite), MA acting as dynamic support/resistance, and MA slope changes indicating momentum shifts.
Trading Strategies
Formula
SMA = (P1 + P2 + ... + Pn) / nwhere P = Price, n = Number of periods
Tips & Common Mistakes
Pro Tips
- •Use 200 SMA for long-term trend identification
- •Multiple MAs show trend at different timeframes
- •SMA acts as dynamic support/resistance
- •Consider EMA for more responsive signals
Common Mistakes
- •Using too short a period (noisy signals)
- •Trading every MA cross without context
- •Ignoring the overall trend direction
- •Using MA alone without other confirmation