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Simple Moving Average (SMA)

The simpelest of them all. With this you can see where price is heading (trend) and you can also use it to create buy and sell signals.

A Moving Average (als called rolling average or running average) is calculated from previous prices. It takes a number of periods, adds them up, maybe do some other calculations on it and then divides that number by the number of periods. This gives the value of a point from the moving average line. The previous periods are taken from before that point.

Every point on this line is calculated by: Taking a previous number of time periods (20 days), taking the prices of those days, adding them all up and dividing them by the number of time periods (20) you have added up. This creates the average or mean.

If the periods to calculate the SMA are around 15-20, then you can use the line on the chart to generate buy and sell signals as follows.

Buy Signal; If price drops and crosses below the line, that is a buy signal. On the chart in blue arrows.

Sell Signal; If the price rises and crosses over the line, that is a sell signal. On the chart in red arrows.

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