Simple Moving Average SMA

Simple Moving Average SMA

The easiest way to see a chart image information to the adjusted trend is the Simple Moving Average number of course, in English, "Simple Moving Average", dar. Viewed from the mathematical side it is the arithmetic mean of a number of individual series length. In spite of - in Vegleich to other highly complex indicator systems - simple derivation of the simplest form of averaging is still of great practical importance, the most important application areas are the traditional trend determination, integration into automated trading systems and the use as a signal line in combination with other indicators.

The mathematical derivation corresponds - as already noted - the calculation of the arithmetic mean, there are added up the prices of the observation period and then divided by the period length. Instead of closing prices, other data are used to meet often, for example, the use of the average trading volume or the average trading range.


The term "gliding" derives from the fact that with this form of averaging is always the oldest course the currently added "sacrificed." Basically, that determine the length of the period specified affects the intensity of the smoothing. Shorter periods (eg 10 days) result in that the indicator follows the price trend relatively narrow, the famous 200-day moving average (SMA with period thus giving 200 days), however, has a very large inertia.

As the mother of all moving Simple Moving Average number of points on why certain disadvantages Avergae also created several variations on the original concept over the years. To call in the first place is the inertia of the SMA (often referred to as "lag") and the equal weighting of all the records in the period. Thus, the last course in a 14-day moving average value for the same course as the first indicator value. In the event that a market value greater deviation from the sliding calculation falls out it can cause major distortions.