Description
The Simple Moving Average is calculated by summing the closing prices of the security for a period of time and then dividing this total by the number of time periods. Sometimes called an arithmetic moving average, the SMA is basically the average stock price over time. As a trend develops, the moving average will slope in the direction of the trend, showing the trend direction and some indication of its strength based on the slope steepness.
Another analysis technique that is often used with moving averages is looking for price breakouts: crossovers of the price plot with the moving average. Bullish breakouts are indicated every time the price crosses above the average. When the price falls below the average, a bearish breakout is recognized. By default, breakout signals are disabled; to enable them, set the show breakout signals parameter value to yes.
Note that since the simple moving average gives equal weight to each daily price, recent market volatility may appear smoothed out. Long-term moving averages tend to eliminate minor fluctuations showing only longer-term trends. Shorter-term moving averages may show shorter-term trends but tend to neglect the long-term ones.
Input Parameters
| Parameter | Description |
|---|---|
price
|
The price used to calculate the average. |
length
|
The number of bars used to calculate the average. |
displace
|
The displacement of the SMA study, in bars. Positive values signify backward displacement. |
show breakout signals
|
Controls visibility of breakout signals. |
Plots
| Plot | Description |
|---|---|
SMA
|
The Simple Moving Average (SMA) plot. |
UpSignal
|
If enabled, displays an up arrow every time the price crosses above the simple moving average. |
DownSignal
|
If enabled, displays a down arrow every time the price crosses below the simple moving average. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.
Past performance is no guarantee of future performance.