Simple Moving Average (SMA)

A simple moving average is the simplest form of moving averages. Basically, a simple moving average is calculated by adding the last closing price of "x" periods and then dividing that number by "x". If you're confused, do not worry, we will clarify.

If you put 5 simple moving averages on a graph of 1 hour, then add the closing prices of the last 5 hours and then divided that number by 5, and go! Here a simple moving average!
Simple Moving Average (SMA)
If you were to place a simple average Mobile 5 on a 10 minute chart, we must add the closing prices of the last 50 (5 x 10) minutes and then divide the result by 5.

If you were to place a simple moving average of 5 on a 30-minute chart, there are the closing prices of the past 150 (30 x 5) minutes and divide the result by 5.

Most graphics / platforms make the calculation automatically. But, we explain how to perform the calculation of simple moving averages because it is important that you understand. If understood as moving average is calculated each, you can decide better on which to use.

Like any other indicator, moving averages are a lagging indicator. Since you are working with the averages of the price, you are only seeing a forecast of future price and not the particular view of the future.

Simple moving average

This is an example of how moving averages move the price.

In the graph above, there are 3 SMA (Simple Moving Average) different. As you can see, the longer the period of the SMA, the more it lags behind the price. Note that the SMA 62 is much longer than the current price than the other SMA (30 and 5). The reason for this is that with the SMA 62, are adding the closing prices of the last 62 periods and the result is divided by 62.

The higher the period number is used, the slower the reaction to price movement.

This graph shows the SMA market sentiment at this moment in time. Instead of looking at the current market price, moving averages give us a broader view, and thus we can make a general prediction of future price.




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