Simple Moving Average (SMA) - ForexAbode.com
Last Updated (Wednesday, 09 November 2011 00:52) GMT
Simple Moving Average:
Simple moving average or arithmetic moving average is nothing but average of values moving on the time axis. The simple moving average of "N" periods for the trading current period is the sum of the prices of pervious "N" periods divided by "N". It is called simple moving average because during the next time period the price of the current period will be included and the price of the current "N" period will be taken out from the sum of 1 to N periods.
SMA Example:
Lets say we need to calculate 5 days SMA for the current period. The periods and prices are as follows:
|
Periods (say days)
|
1
|
2
|
3
|
4
|
5
|
current
|
|
Closing Prices
|
111
|
110
|
112
|
113
|
109
|
--
|
So the current SMA = (111+110+112+113+109)/5 = 111.
For the SMA of the nex period the closing price of the current period will be included and price of the current period 1 will be excluded.
Every value of the N periods gets the same weight i.e. 1 and hence it is different from the EMA and WMA.
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