An SMA indicator employs a calculation formula that, by taking pricing data and averaging it out over a period chosen by the trader, aids in the comprehension of the data. The Simple Moving Average is calculated by first adding the price of an instrument (such as the opening or closing price) over a predetermined number of periods, then dividing that sum by the number of periods. The Simple Moving Average is the end result. It is, as the name implies, a simple method for determining the average price of an instrument over a given time period. To perform the various calculations required by a SMA indicator, various software programmes are used. The simple moving average formula generates a line that gradually shifts position and is superimposed on the price chart. As previously mentioned, it is possible to compare the average price of an instrument over a range of periods using not one but two distinct simple moving averages.

The Simple Moving Average (SMA) is a widely used technical indicator that calculates the average price of an asset over a specific period. To compute the SMA, you first select a time frame (e.g., 10, 50, or 200 days). Then, you sum up the closing prices of the asset over that period and divide the total by the number of days. For example, a 10-day SMA adds the last 10 closing prices and divides by 10. As new data becomes available, the oldest price drops out, ensuring the SMA reflects recent trends. Unlike exponential moving averages (EMA), the SMA gives equal weight to all prices in the period, making it smoother but slower to respond to price changes. Traders use SMAs to identify trends, support/resistance levels, and potential reversals.