What it is
A simple moving average is the average closing price over the last N days. Each day the oldest price drops off and the newest is added, so the line "moves" with the price but more smoothly.
SMA = (sum of the last N closing prices) / N
For example, closes of 10, 11, 12, 11 and 13 give a 5-day SMA of 57 / 5 = 11.4.
Common periods
| Period | Used for |
|---|---|
| 20-day | Short-term trend, about a month of trading |
| 50-day | Medium-term trend |
| 200-day | Long-term trend. See The 200-day moving average |
Reading it
- Price above a rising average: uptrend.
- Price below a falling average: downtrend.
- Golden cross: 50-day crosses above the 200-day.
- Death cross: 50-day crosses below the 200-day.
Limits
An SMA lags: it only confirms a trend after it has started. Every price in the window counts equally, so a big move 49 days ago matters as much as yesterday's. The Exponential moving average (EMA) weights recent prices more to reduce the lag.
See also
- Exponential moving average (EMA) How the exponential moving average weights recent prices more heavily than a simple average, how to calculate it, and when traders prefer it.
- The 200-day moving average Why the 200-day moving average is the most-watched trend line in investing, what the research shows about markets above and below it, and its weaknesses.
- MACD indicator How the MACD indicator is built from two exponential moving averages, what the signal line and histogram show, and how crossovers are read.
- Momentum investing What price momentum is, the evidence that recent winners tend to keep winning for a while, how momentum is measured, and its crash risk.
Pages that link here: Fundamentals vs technicals
Last updated September 30, 2026. Education only, not investment advice.