Simple Moving Average (SMA)

A simple moving average (SMA), also know as simple-day moving average or simply moving average, is a technical indicator that determines the average of a chosen range of prices, typically the closing prices, by the quantity of periods in that range. For example, the 50 SMA adds up the closing prices of the past 50 days and divides the sum by 50 (days) to make an arithmetical average. From that calculation, the SMA indicator displays a line in the chart that can be used as a support level if price is above it or a resistance level is price is below it. Generally, more that one moving average is used, in order to have a more complete picture analysis of price action during short-, intermediate- and long-term periods. Other moving averages exist, such as the weighted moving average (WMA) and the exponential moving average (EMA).