Simple Moving Average (SMA)

Simple Moving Average (SMA) is a running arithmetic moving average used to smooth a data series. Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react. 

Simple Moving Average (SMA)

Simple Moving Average (SMA) is a running arithmetic moving average used to smooth a data series. 

 


Calculation of Simple Moving Average

A Simple Moving Average is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods.

 Application of Simple Moving Average

Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react.  Two moving averages are often used to create a crossover signal such as the Golden Cross.  This involves one short term and one long term moving average.


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