Glossary
Simple moving average (SMA)
The plain average of the last N closing prices, recalculated each bar; the most common way to smooth a price series and read its trend.
On this page
A simple moving average (SMA) is the arithmetic mean of the last N prices, usually closes, recomputed every bar so the window "moves" forward through time. It smooths out day-to-day noise and turns a jagged price series into a line whose direction and slope describe the trend. The 50-day and 200-day SMAs are among the most widely watched lines in the market.
How it works
Each new bar adds the latest close and drops the oldest one, and every price in the window counts equally.
How traders read it
Price above a rising SMA is the textbook sign of an uptrend; price below a falling one points the other way. Crossovers between a short and a long average are popular signals, including the golden cross and death cross on the 50 and 200-day lines. Many traders also treat a widely followed SMA as a zone of support or resistance.
The trade-off is lag. Because the SMA weights a price from 50 days ago as heavily as yesterday's, it turns late, and in sideways markets crossovers fire repeatedly with no follow-through. The exponential moving average reacts faster by weighting recent prices more. Longer windows smooth more and lag more; there is no setting that removes that tension.