Courses / Trend and Momentum Indicators

Simple Moving Average (SMA)

The average of the last N closes, used to see trend direction and dynamic support.

The simple moving average adds the last N closing prices and divides by N. A 50 SMA is the average of the last 50 closes. It smooths noise and shows the trend direction.

Price above a rising average suggests an uptrend. Many traders watch the 50 and 200 SMA on daily charts because many others do too, which makes them act as dynamic support and resistance.

A longer period is smoother but slower. A shorter one reacts faster but whipsaws more in ranges.

Key takeaways

• SMA = average of the last N closes
• Price above a rising SMA = uptrend bias
• Longer period = smoother but slower

Quiz

• A 50 SMA averages the last: Answer: 50 closes. It averages 50 closes.
• A longer SMA is: Answer: Smoother and slower. Longer periods smooth more.
• Why do the 50 and 200 SMA matter? Answer: Many traders watch them. Crowd behaviour makes them relevant.

Educational content, not financial advice.