Simple Moving Average

What is SMA?

SMA smooths price action by averaging prices over a period. 50-day SMA shows short-term trend, 200-day shows long-term trend.

Think of it like this

Like tracking your average daily steps. Daily numbers jump around, but 30-day average shows the real trend - are you getting more or less active over time?

Formula

SMA = Sum of Prices / Number of Days
  • Sum of Prices: Add up closing prices
  • Number of Days: 50 or 200 days typically

Why it matters

  • Smooths out daily noise
  • Shows trend direction
  • Acts as support/resistance
  • Golden cross/death cross signals

What's a good value?

Price > SMA
Bullish
Uptrend, momentum positive
Price < SMA
Bearish
Downtrend, momentum negative
50 > 200 SMA
Golden Cross
Strong bullish signal
50 < 200 SMA
Death Cross
Strong bearish signal
50 SMA > 200 SMA
Golden Cross
Very bullish signal

Real-world example

Stock at $100, 50-SMA at $95, 200-SMA at $85. Stock is above both averages (bullish). If 50-SMA crosses above 200-SMA, that's a golden cross buy signal.

Things to watch out for

  • Lagging indicator - follows price
  • Whipsaws in choppy markets
  • Less useful for sideways movement
  • Different periods for different timeframes

Screen US stocks by SMA in the app, and see which companies pass right now.