trend indicator
Simple Moving Average (SMA)
SMA calculates the average price over a fixed number of periods, giving equal weight to each period. It smooths price action to reveal the underlying trend.
Formula
SMA = (P1 + P2 + ... + Pn) / N where P = price, N = number of periods
Method: Fidelity: Simple Moving Average
Common strategies
- Golden cross: SMA(50) crossing above SMA(200) — a bullish long-term signal.
- Death cross: SMA(50) crossing below SMA(200) — a bearish long-term signal.
- Support/resistance: SMA(200) acts as dynamic support in bull markets and resistance in bear markets.
How CommonQuant uses it
CommonQuant pre-calculates SMA(20), SMA(50), and SMA(200) on all timeframes. DSL strategies can reference sma(period).
Frequently asked questions
What is a golden cross?
A golden cross occurs when the 50-period SMA crosses above the 200-period SMA. It is a lagging trend signal and can reverse without a lasting uptrend.
SMA vs EMA — what's the difference?
SMA gives equal weight to all periods, while EMA weights recent prices more heavily. EMA reacts faster and can change direction more often; SMA is smoother. Both describe past prices and can give false signals.