SMA

Simple moving average — smoothed trend line.

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.

SMA_t = (P_t + P_{t-1} + ... + P_{t-N+1}) / N

Read the full Simple moving average (SMA) definition in the glossary →