Simple Moving Average
The Simple Moving Average is the average closing price over the last N days. It smooths noise to reveal the underlying trend.
What It Measures
Trend. Whether the average price of the last N days is rising or falling, and where price sits relative to that average.
The Math (Simplified)
Add up the last N closing prices and divide by N. Each day, the oldest price drops out and the newest joins in.
Default Inputs & Tuning
200 (long-term trend) and 50 (medium-term trend) are the most common windows. Longer periods react slower but give fewer false signals.
When It Works (Market Edge)
Strong, sustained trends: a price above its 200-day average in an uptrend stays above it for months.
When It Fails
Sideways, ranging markets: price oscillates around the average, so crossing signals fire repeatedly and lose money to whipsaws.
Common Myths
Myth: A price above the 200-day SMA always means the market is safe to buy.
Truth: It only means the recent average is above the older average. In a late-stage rally or a crash, the average lags far behind price.
Myth: Golden crosses predict big gains.
Truth: Golden crosses (SMA 50 crossing above SMA 200) happen often and are already priced in by the time they trigger.
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