In one of the previous articles, I had
mentioned about Moving average and its kind in general. Now in this
article, we will go further down a bit by discussing the easiest form
of them all, Simple moving average (SMA).
SMA shows the main movement of the
price. The movement are plotted by subtracting the closing price of
the current time-frame from the closing price of the previous
time-frames which shows the average in a form of a curve line. It's
main task is to even the price change, depicting a simpler view on
the direction which it is currently tracking on a certain period of
time.
Calculation
The calculation of SMA is done by
summing up the closing prices of the instrument over a certain number
of single periods then divided by the number of such periods.
SMA = SUM(CLOSE, N)/ N
N= is number periods.
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