SMA
Technical Analysis
What it means
Simple Moving Average: the plain average of closing prices over a set period, where every day counts equally.
Example
A 10-day SMA of closes [100, 101, 102, ..., 109] is (100+101+...+109) / 10 = $104.50. Each close carries the same weight in the average.
Mistake beginners make
Beginners expect the SMA to react fast. By design it lags -- a 200-day SMA reflects half a year of old prices and is slow to turn.
Related terms
- Moving Average — A line showing the average price over a set number of periods, which smooths out noise and…
- EMA — Exponential Moving Average: a moving average that gives more weight to recent prices, so i…