A Simple Moving Average (SMA) is a technical indicator used in financial analysis to measure the average price of a security over a specific period of time. It is calculated by adding up the closing prices of a security for a certain number of time periods and then dividing that total by the number of time periods.The formula for a Simple Moving Average is: -SMA = (Sum of closing prices for the number of periods) / Number of periodsFor example, if a stock's closing prices for the last 10 days were: $10, $12, $15, $14, $13, $16, $15, $11, $12, $13,the 10-day Simple Moving Average would be: (10 + 12 + 15 + 14 + 13 + 16 + 15 + 11 + 12 + 13) / 10 = $13.5The most common time periods used to calculate a Simple Moving Average are 20, 50, and 200 days. A shorter moving average, such as a 20-day moving average, is more sensitive to short-term price changes and is useful for identifying short-term trends. A longer moving average, such as a 200-day moving average, is less sensitive to short-term price changes and is useful for identifying long-term trends.Simple Moving Average can be used to identify trends, determine support and resistance levels, and generate buy and sell signals. It's important to note that Simple Moving Average is a lagging indicator, meaning that it's based on past prices and may not be able to predict future prices. It's also important to use multiple indicators and tools to confirm the signals generated by the Simple Moving Average.
