What SMA shows
The plain average of the last N closes. The 50 and 200 SMA are watched by almost everyone.
Indicator guide · Moving averages
Simple Moving Average (SMA): what it shows, settings and how to read it.
The plain average of the last N closes. The 50 and 200 SMA are watched by almost everyone.
How it is calculated
Add the last N closing prices and divide by N. Every candle in the window counts equally.
Usual settings
20 for the short term, 50 and 200 for the medium and long term.
How traders read it
The 50 crossing above the 200 is the "golden cross"; below it, the "death cross". Price often reacts when it touches the 200 SMA.
Where it fails
It reacts slowly, so signals arrive after a good part of the move.
What to combine it with
Volume to confirm a break of the 50 or 200 line, and RSI to avoid buying when price is already stretched.
Try SMA on a live chart
Sign in, open Genni Charts, press the "ƒx Indicators" button above the chart and choose SMA. Click its name on the chart to change the settings. It is free for every member.
More in "Moving averages": EMA · WMA · HMA · VWAP · All 25 indicators
Questions
Frequently asked questions
What is the SMA indicator?
The plain average of the last N closes. The 50 and 200 SMA are watched by almost everyone.
What are the best settings for SMA?
The usual settings are: 20 for the short term, 50 and 200 for the medium and long term. No setting is best in every market, so test a change on past data before relying on it.
Is SMA reliable on its own?
No single indicator is. It reacts slowly, so signals arrive after a good part of the move. Most traders use it together with: Volume to confirm a break of the 50 or 200 line, and RSI to avoid buying when price is already stretched.
How do I add SMA to a chart for free?
Sign in, open Genni Charts, press the "ƒx Indicators" button above the chart and choose SMA. Click its name on the chart to change the settings. It is free for every member.
This page is education, not investment advice. Trading involves substantial risk of loss. Read next: Trading indicators · Trading strategies · Candlestick patterns