A simple moving average (SMA) calculates the average of a selected range of prices, usually closing prices, by the number of periods in that range. A simple moving average is a technical indicator that can aid in determining if an asset price will continue or if it will reverse a bull or bear trend.
-Understanding a Simple Moving Average (SMA)
A simple moving average (SMA) is an arithmetic moving average calculated by adding recent prices and then dividing that figure by the number of time periods in the calculation average. For example, one could add the closing price of a security for a number of time periods and then divide this total by that same number of periods. Short-term averages respond quickly to changes in the price of the underlying security, while long-term averages are slower to react. Moving averages are widely used in technical analysis, a branch of investing that seeks to understand and profit from the price movement patterns of securities and indices.