Simple Moving Average (SMA)
The Simple Moving Average (SMA) is an arithmetic moving average indicator. This indicator is displayed as a line that overlaps the candles on the graph. This line is often used to see if the current price action is above or below the line. If the price action is above the line the market is considered to be bullish, however, when the price action is below the line the market is considered to be bearish.
The longer the timeframe that is used to calculate the SMA the slower it will react to market changes.
Another way SMA can be used is by using multiple timeframes together to find “golden crosses”. This is when the 50-day SMA goes above the 200-day SMA. The opposite of a golden cross is a “death cross”, which is when the 50-day SMA goes below the 200-day SMA.
SMA is calculated by adding the prices of the candles together and then diving them by the timeframe. For example, if you want to get the SMA for 5 days you would add the previous 5 days' candle prices together and divide the sum by 5.
To calculate the SMA this is the equation