The Simple Moving Average or SMA is often called the ordinary or simple moving average because it is calculated with the simplest formula in the class.
Many trader apply SMA on the daily charts. Institutions and banks are following this Indicator.
Simple Moving Average (SMA) is the simplest type of Moving-Average (MA) in forex analysis.
In this case, the average asset price for the selected period is used. SMA is calculated by adding the price of an instrument over a number of time periods and then dividing the sum by the number of time periods.
The SMA helps identify a trend and clearly shows when it will end. Simple Moving Average (SMA) is basically the average-price of the given time period, with equal weighting given to the price of each period.
How do I read SMA signals?
The SMA is used both in combination with other indicators and on its own.
If the SMA rise above its average, then the indicator’s ascending movement will continue.
When the chart crosses the indicator upwards from below, it likely signals a rise.
If the indicator falls below its average, this implies a descending trend.
When the chart crosses the SMA downwards from above, it likely signals a fall.
Secrets of SMA indicator
The simple moving average (SMA) is one of the most popular and simplest indicators.
The SMA averages price data and helps reveal trends. Visually, it is a line.
Moving Average (MA) is a widely used indicator in technical analysis that helps smoothout price action by filtering out of random short term price.
Moving Average are to identify the trend direction and to determine support and resistance levels.
It reliably tracks the chart and, smoothing out random price fluctuations, it shows the direction in which the asset’s value is moving.