What Is SMA (Simple Moving Average)?
A Simple Moving Average sums the closing prices over a specified number of periods and divides by that number. Every period contributes equally — there's no weighting bias toward recent data.
Common SMA periods include 20 (short-term trend), 50 (intermediate), 100, and 200 (long-term). The "golden cross" — when the 50-SMA crosses above the 200-SMA — is a widely-watched long-term bullish signal. The opposite ("death cross") signals long-term weakness.
SMAs are slower than EMAs because they don't overweight recent price action. This makes them less useful for short-term timing but more reliable as long-term trend filters. Many systematic strategies use the 200-SMA as a regime filter: only take long signals when price is above the 200-SMA.
Related terms
- EMA (Exponential Moving Average) — Moving average that gives more weight to recent prices, reacting faster than a simple average.
- Moving Average — A line plotted on a chart showing the average price over a chosen lookback period.