The simple moving average (SMA) is the arithmetic mean of the most recent N closing prices. Every observation in the window has the same weight (1/N), and once a price falls off the back of the window it stops contributing.
Because it treats today's close the same as the close N bars ago, the SMA reacts slowly to new information — it is the most lag-heavy moving average. Quants use it precisely because that lag is well-defined and easy to reason about in backtests.
Common windows are 20 (one month of daily bars), 50 (about a quarter), and 200 (about a year). Crossovers between SMAs of different lengths form the classic golden cross / death cross signals.
Formula
SMA_t = (P_t + P_{t-1} + ... + P_{t-N+1}) / NExample
5-period SMA over closes [100, 102, 104, 103, 106] = (100+102+104+103+106) / 5 = 103.
How Noon Barbari uses Simple moving average (SMA)
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See the indicators reference →Related terms
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Moving average
A rolling average of price over a fixed window, used to smooth noise.
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Exponential moving average (EMA)
Weighted moving average that gives recent bars exponentially more weight.
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MACD
Trend-momentum hybrid: difference of two EMAs, plus a signal-line EMA and histogram.
- Market structure
Trend
A persistent directional drift in price — up, down, or sideways.