What is the best SMA period?

It depends on your trading style. Day traders often use 9-20, swing traders use 50, and position traders use 200. The "best" period is one that works for your strategy and timeframe.

What is a Golden Cross?

A Golden Cross occurs when a shorter-term MA (typically 50) crosses above a longer-term MA (typically 200), signaling a potential long-term bullish trend.

Key Takeaways

Difficulty:Beginner

Reliability:High

Category:trend

Timeframes:1H, 4H, Daily

Simple Moving Average (SMA)

Q: What is the difference between SMA and EMA?

SMA gives equal weight to all prices in the period, while EMA gives more weight to recent prices, making it more responsive to new information but also more prone to false signals.

trend📊 1H, 4H, Daily, Weekly

The SMA calculates the average price over a specific number of periods, smoothing out price data to identify trend direction.

Formula

Code

SMA = (P₁ + P₂ + P₃ + ... + Pₙ) / n

Detailed Explanation

The Simple Moving Average (SMA) is one of the most fundamental technical indicators in trading. It calculates the arithmetic mean of prices over a specified period, creating a smoothed line that helps traders identify the overall trend direction.

**How It Works:** The SMA adds up the closing prices for a set number of periods and divides by that number. For example, a 20-period SMA adds the last 20 closing prices and divides by 20.

**Key Concepts:** - **Trend Direction**: Price above SMA = bullish, below = bearish - **Dynamic Support/Resistance**: SMAs often act as support in uptrends and resistance in downtrends - **Crossover Signals**: When a faster SMA crosses a slower SMA, it generates trading signals

**Popular SMA Periods:** - 20 SMA: Short-term trend - 50 SMA: Medium-term trend - 200 SMA: Long-term trend (institutional level)

Parameters

Period

Default: 20

Number of bars to average

Source

Default: Close

Price data to use (Open, High, Low, Close)

📈 Bullish Signals

Price crosses above SMA or faster SMA crosses above slower SMA

📉 Bearish Signals

Price crosses below SMA or faster SMA crosses below slower SMA

Python Implementation

Using pandas-ta for SMA calculation with crossover detection

Python

import pandas_ta as ta

# Calculate SMA

df['SMA_20'] = ta.sma(df['close'], length=20)

df['SMA_50'] = ta.sma(df['close'], length=50)

df['SMA_200'] = ta.sma(df['close'], length=200)

# Generate crossover signals

df['golden_cross'] = (df['SMA_50'] > df['SMA_200']) & (df['SMA_50'].shift(1) <= df['SMA_200'].shift(1))

df['death_cross'] = (df['SMA_50'] < df['SMA_200']) & (df['SMA_50'].shift(1) >= df['SMA_200'].shift(1))

TradingView Pine Script

Try on TradingView

JavaScript

//@version=5

indicator("SMA Strategy", overlay=true)

// Input parameters

fast_len = input.int(20, "Fast SMA")

slow_len = input.int(50, "Slow SMA")

// Calculate SMAs

fast_sma = ta.sma(close, fast_len)

slow_sma = ta.sma(close, slow_len)

// Plot

plot(fast_sma, "Fast SMA", color=color.blue)

plot(slow_sma, "Slow SMA", color=color.red)

// Crossover signals

bullish = ta.crossover(fast_sma, slow_sma)

bearish = ta.crossunder(fast_sma, slow_sma)

plotshape(bullish, style=shape.triangleup, location=location.belowbar, color=color.green)

plotshape(bearish, style=shape.triangledown, location=location.abovebar, color=color.red)

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MT5 MQL5 Code

C++

// MQL5 SMA Indicator Access

int sma_handle = iMA(_Symbol, _Period, 50, 0, MODE_SMA, PRICE_CLOSE);

double sma[];

ArraySetAsSeries(sma, true);

CopyBuffer(sma_handle, 0, 0, 3, sma);

// Current SMA value

double current_sma = sma[0];

// Check price vs SMA

bool above_sma = iClose(_Symbol, _Period, 0) > current_sma;

Python Libraries

pandas-ta

Technical analysis library with 130+ indicators

pip install pandas-ta

TA-Lib

High-performance C library with Python wrapper

pip install TA-Lib

Common Mistakes

✗Using SMA in ranging/choppy markets leads to whipsaws

✗Relying solely on SMA without confirmation from other indicators

✗Using too short periods in volatile markets

✗Ignoring the lag inherent in moving averages

Confirmation Signals

Volume spike on crossover

RSI confirming momentum direction

Price breaking key support/resistance

Multiple timeframe alignment

Best For

Trend identificationSupport/resistance levelsCrossover strategies

💡 Pro Tips

•SMA lags price action - better for confirming trends than predicting them
•Use multiple SMAs (e.g., 20, 50, 200) for stronger confirmation
•Works best in trending markets, generates false signals in ranging markets

Last updated: December 29, 2024

Educational Disclaimer

This content is for educational purposes only and does not constitute financial or investment advice. Trading involves significant risk and you may lose your capital. Always consult a licensed financial advisor before making investment decisions.

Learn More

Investopedia - Technical Indicators— Financial Education BabyPips - Technical Indicators— Trading School MetaTrader 5 Docs— Official Documentation

Frequently Asked Questions

Related Indicators

Exponential Moving Average (EMA)

EMA gives more weight to recent prices, making it more responsive to new information than SMA.

MACD (Moving Average Convergence Divergence)

MACD shows the relationship between two EMAs. Consists of MACD line, signal line, and histogram.

Bollinger Bands

Consists of a middle band (SMA) and upper/lower bands set at standard deviations from the middle.

Back to All Indicators