Simple Moving Average Calculator

Simple Moving Average Formula:

\[ SMA = \frac{\sum_{i=1}^{n} P_i}{n} \]

Simple Moving Average (SMA):

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1. What is Simple Moving Average?

The Simple Moving Average (SMA) is a technical analysis tool that calculates the average price of a security over a specific number of periods. It smooths out price data by creating a constantly updated average price.

2. How Does the Calculator Work?

The calculator uses the SMA formula:

\[ SMA = \frac{\sum_{i=1}^{n} P_i}{n} \]

Where:

\( P_i \) — Price at period i (USD)
\( n \) — Number of periods (unitless)

Explanation: The SMA is calculated by adding up the prices over the specified number of periods and then dividing this total by the number of periods.

3. Importance of SMA Calculation

Details: SMAs are widely used in technical analysis to identify trends, determine support and resistance levels, and generate trading signals.

4. Using the Calculator

Tips: Enter prices as comma-separated values (e.g., "10,12,11,13") and specify the number of periods to average over. The calculator will use the most recent prices for the calculation.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between SMA and EMA?
A: SMA gives equal weight to all prices, while Exponential Moving Average (EMA) gives more weight to recent prices.

Q2: What are common SMA periods used in trading?
A: Common periods include 10, 20, 50, 100, and 200 days, depending on the trading strategy and time frame.

Q3: How can SMA help identify trends?
A: When price is above SMA, it may indicate an uptrend; when below, a downtrend. Crossovers of different period SMAs can signal trend changes.

Q4: What are limitations of SMA?
A: SMA is lagging indicator that reacts slowly to price changes and may give late signals in volatile markets.

Q5: Can SMA be used for all types of securities?
A: SMA can be used for stocks, forex, commodities, and other securities, but optimal periods may vary by market.