Simple Moving Average (SMA)

The Simple Moving Average is a commonly used tool by traders to analyze the general trend of the price. The SMA is a trend indicator that smooths price movements to filter out the noise of an asset. Traders frequently use this indicator to open and close trades through moving averages crossovers, and to find supports and resistances in different time frames. These crossovers are generated by predefining two moving averages, a slow and a fast one. The slow SMA takes into account a larger amount of periods, then catching the general trend of the asset. And the fast SMA is calculated with fewer periods, reacting quicker to price movements. During a bearish trend, when the fast SMA crosses the slow one upward, the trend is likely to have a reversal or correction and signals a buy. However, in a bullish trend and the fast SMA crosses the slow one downward, we will get a selling point.


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