Simple Moving Average (SMA)
The oldest and most widely used trend indicator: an average of recent closes that smooths out market noise and acts as a dynamic reference line.
The Simple Moving Average (SMA) is probably the most widely used technical indicator in the world. Its principle is straightforward: instead of watching a price that zigzags constantly, you plot the average of recent closes. The result is a smoothed line that follows price with a lag and highlights the market's overall direction.
In use since the early days of technical analysis, long before computers, the SMA serves as a trend filter, a dynamic support or resistance, and the computational basis for many other indicators, including Bollinger Bands.
How it's calculated
The calculation is a plain arithmetic mean: add up the closes of the last N candles, then divide by N. With each new candle, the oldest one drops out of the calculation and the newest one enters : hence the term "moving". A 20 SMA on the daily is therefore the average of the last 20 daily closes.
In Screener.Trading, the default period is 20 candles, but you can change it freely in each rule. The most widely watched periods are 20 (short-term trend), 50 (intermediate trend) and 200 (long-term trend). The longer the period, the smoother the line, and the later it reacts.
How to read it
- Direction: a rising SMA signals an uptrend on its horizon; a falling SMA, a downtrend.
- Price position: a price holding above its 200 SMA is classically considered to be in a long-term uptrend.
- Crossovers: the 50 SMA crossing above the 200 SMA is the famous "golden cross"; the reverse cross, the "death cross".
- Dynamic support/resistance: in a trend, price often pulls back to its moving average before resuming.
The SMA's main limitation is its lag: it confirms a trend already in place rather than anticipating it. In a trendless (ranging) market, price crosses its average in both directions and crossovers produce many false signals. It is a trend-following indicator, not a precise timing tool.
In the screener
The SMA is one of the most effective trend filters in a screener. Rule examples you can build in Screener.Trading: "close above the 200 SMA on D1" to keep only bullish assets; "50 SMA above the 200 SMA on D1" to detect active golden crosses; "close below the 20 SMA on H4" to spot a pullback within a trend.
Cross-timeframe comparisons add another dimension: you can for instance require the H1 close to stay above the daily 200 SMA, so you only take intraday signals in the direction of the underlying trend. A validity-window rule ("the condition has held for at least 5 candles") further filters out short-lived crosses.
A moving average alone is not enough: in a range, its crossovers multiply false signals. Combine it with a momentum indicator such as the RSI or MACD.
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- IndicatorExponential Moving Average (EMA)A moving average that gives more weight to recent candles: it hugs price more closely than the SMA and reacts earlier to trend changes.
- IndicatorPrice: the raw data behind all technical analysisBefore any indicator, there is price. The close, open, high and low of each candle are the building blocks of your screener rules.
- IndicatorBollinger BandsA volatility envelope around a moving average: the bands widen when the market gets busy and tighten when it calms down.
- IndicatorMACD (Moving Average Convergence Divergence)A momentum indicator built on two exponential moving averages: its crossovers and histogram measure the acceleration and exhaustion of trends.
- GlossaryTimeframeA timeframe is the duration each candle on a chart represents (from one minute to several months) and sets the horizon of the analysis.
- GlossaryMulti-timeframe analysisMulti-timeframe analysis means studying the same asset across several timeframes, typically a higher one for the trend and a lower one for timing.
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- GuideBacktesting a trading strategy, step by stepBefore risking a cent, replay your strategy on historical data: backtest setup, reading the key metrics, and the traps of over-optimization.