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Simple Moving Average SMA

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Definition of 'Simple Moving Average SMA'

The SMA is the Simple Moving Average.

An SMA is calculated over a number of candles/bars in a chart as the simple average value of that number of bars.

Say, for example, you wanted the SMA for the last 10 days closing prices of the DJIA. You would add together the closing prices for the last 10 days of the DJIA and then divide that by 10. That would give you the 10 day SMA.

You do not need to use just the closing price to calculate this. You can also use the Open, High, Low, and Close or a combination of any of those. Traders sometimes use the High, Low, Close average to produce the SMA. You may see this notation as HLC/3.

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