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.