trend Indicator
What Is Simple Moving Average (SMA)?
SMA calculates the average price over a specific number of periods, giving equal weight to each price point.
Quick Answer
SMA calculates the average price over a specific number of periods, giving equal weight to each price point.
What Does SMA Measure?
The Simple Moving Average (SMA) is one of the most fundamental technical indicators. It calculates the arithmetic mean of prices over a specified period, smoothing out price fluctuations to reveal the underlying trend. Popular SMAs include the 50-day, 100-day, and 200-day moving averages, often used to identify major support/resistance levels.
Formula:
SMA = (P1 + P2 + ... + Pn) / n, where P = price and n = number of periodsHow to Read SMA
- 1Price above SMA suggests bullish trend
- 2Price below SMA suggests bearish trend
- 3SMA crossovers signal potential trend changes
- 4Multiple SMAs can identify trend strength
How to Use SMA in Trading
✓Identify overall trend direction
✓Find dynamic support and resistance levels
✓Generate crossover trading signals
✓Smooth out price noise
SMA Settings
| Setting | Default | Description |
|---|---|---|
| Period | 20 | Number of periods for average calculation |
| Source | close | Price source (open, high, low, close) |
Common Mistakes to Avoid
✕Using SMA alone in ranging markets
✕Ignoring the lag inherent in moving averages
✕Using inappropriate periods for the timeframe
✕Taking every crossover without confirmation
Use SMA in VaultCharts
VaultCharts includes Simple Moving Average with customizable settings. Combine it with our automated pattern detection and trade signals for better analysis.