# 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.