Indicator
Simple Moving Average (SMA)
A simple moving average is the arithmetic mean of the last N closing prices, recalculated at every new bar. It smooths a price series so the broader direction is easier to see than it is on raw candles.
How many closes are averaged. Higher = smoother and slower.
Chart runs on a generated sample series, not live or historical exchange data. Values are computed with the same functions CernoQuant uses to run backtests.
How it is calculated
How to read it
- The line lags price by design. A longer period produces a smoother line that reacts more slowly; a shorter period tracks price more closely and changes direction more often.
- Price crossing the average is a description of what has already happened, not a forecast of what comes next.
- The slope shows the direction of the averaged price over the chosen window. A flat slope means the window contains no net movement.
What it does not tell you
- It is entirely backward-looking. Every value is computed from prices that have already printed.
- In sideways markets price crosses the average repeatedly, producing many crossings that lead nowhere.
- It weights a close from N bars ago exactly the same as today’s close, which is why some traders prefer an exponential average.
Common settings
Periods of 20, 50, 100 and 200 are conventional, largely because they are widely used rather than because they are optimal. There is no period that is correct in general.
Frequently asked questions
What does a 200-day moving average mean?
It is the average of the last 200 daily closes. It is watched widely because it is watched widely — its prominence comes from convention and shared attention, not from any property that makes 200 special.
Is SMA better than EMA?
Neither is better in general. SMA weights every close in the window equally; EMA weights recent closes more heavily and therefore turns sooner. Reacting sooner helps in a trend and hurts in chop.
Does a moving average predict price?
No. It is a transformation of prices that have already occurred. It can describe the direction and smoothness of recent movement; it carries no information about future bars.
Related
- Exponential Moving Average (EMA) — Indicator
- Bollinger Bands — Indicator
- Trend vs Range: Why Context Changes Everything — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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