A simple moving average (SMA) smooths a price series by giving equal weight to a specified number of recent observations. Charting platforms commonly use closing prices, although other price inputs are possible. A 20-period SMA refers to 20 selected chart bars: these could represent minutes, hours, or days.
How the window moves
To calculate an SMA, add the prices in the chosen window and divide by the number of observations. If five closing prices are 10, 12, 11, 13, and 14, their sum is 60 and the five-period SMA is 12. When the next close is 15, the oldest value, 10, leaves the window. The new average is 13.
Every included observation has the same weight. This differs from an exponential moving average, which places greater weight on recent prices.
Smoothing and delay
Longer windows generally produce smoother lines but respond more slowly to changing prices. Shorter windows react sooner and show more short-term fluctuation.
Traders use SMAs to describe trend direction or study price and average crossovers. Because the calculation uses past observations, it cannot confirm future direction. Sideways markets can produce repeated crossovers without a sustained trend, so interpretation depends on the timeframe and surrounding price behavior.