SMA (Simple Moving Average)

The Simple Moving Average (SMA) is the most fundamental trend indicator in technical analysis. It calculates the arithmetic mean of the last N closing prices, creating a smooth line that filters out short-term noise and reveals the underlying trend direction.

SMA assigns equal weight to every price in the lookback window:

SMA(N) = (Close_1 + Close_2 + ... + Close_N) / N

Each new candle adds the latest close and drops the oldest one, so the average "slides" forward in time.

• Equal weighting — every bar in the window contributes the same amount.
• Lagging indicator — SMA reacts slower than EMA or WMA because old prices carry the same weight as recent ones.
• Smoothness — longer periods produce smoother curves, shorter periods track price more closely.
• Universal baseline — many other indicators (Bollinger Bands, MACD, Envelopes) are built on top of SMA or its variants.

Trend direction

• Price above SMA — bullish bias.
• Price below SMA — bearish bias.

Crossovers

• Golden Cross: short SMA (e.g. 50) crosses above long SMA (e.g. 200) — bullish signal.
• Death Cross: short SMA crosses below long SMA — bearish signal.

Dynamic support / resistance

• In an uptrend SMA often acts as support.
• In a downtrend SMA often acts as resistance.

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | Number of candles to average |

Common periods: 10 (short-term), 20 (swing), 50 (medium), 100, 200 (long-term).

| Condition | Meaning | |-----------|---------| | close > SMA(200) | Price is above long-term trend | | SMA(50) cross_over SMA(200) | Golden Cross — bullish | | SMA(50) cross_under SMA(200) | Death Cross — bearish | | close cross_over SMA(20) | Price reclaims the 20-period mean |

• SMA(200) is the most watched level on daily charts — institutional traders track it.
• Use two SMAs of different periods for crossover strategies (e.g. 9/21, 50/200).
• In choppy markets SMA crossovers produce many false signals — add a filter (RSI, ADX).
• SMA works best in trending markets; avoid relying on it in tight ranges.