Simple Moving Average (SMA)
The Simple Moving Average (SMA) is a technical analysis indicator used to smooth out price data by creating a constantly updated average price. The SMA is calculated by taking the average closing price of a security over a given number of time periods. The SMA is a lagging indicator, meaning it uses past data to form its calculations, and as such, is best used to confirm trends rather than predict them.
History of the Simple Moving Average
The Simple Moving Average has been used by traders and investors for decades. It was first developed by Dow Theory pioneer Charles Dow in the late 19th century. Since then, the SMA has become one of the most widely used technical analysis indicators. It is used to identify trends, measure momentum, and identify support and resistance levels.
Comparison of Simple Moving Averages
| Time Period | SMA |
|---|---|
| 5 Days | 10.25 |
| 10 Days | 9.50 |
| 20 Days | 8.75 |
| 50 Days | 7.50 |
| 100 Days | 6.25 |
Summary
The Simple Moving Average is a powerful technical analysis indicator used to smooth out price data and identify trends. It is a lagging indicator, meaning it uses past data to form its calculations, and as such, is best used to confirm trends rather than predict them. For more information on the Simple Moving Average, visit Investopedia, The Balance, and Investing.com.
See Also
- Exponential Moving Average (EMA)
- Weighted Moving Average (WMA)
- Bollinger Bands
- Relative Strength Index (RSI)
- Stochastic Oscillator
- Moving Average Convergence Divergence (MACD)
- Average Directional Index (ADX)
- On-Balance Volume (OBV)
- Parabolic SAR
- Price Channel
