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Simple moving average

The plain average of the last N closing prices, recalculated each bar, giving every bar in the window equal weight.

A simple and an exponential moving average over the same pricesOne price line with two smoothed lines drawn through it; the exponential average bends away from the simple average as soon as price turns, and sits between price and the simple average all the way down.SAME PRICES, TWO AVERAGES (8 PERIODS)the EMA turns down firstand stays nearer to price8-day SMA8-day EMApriceIllustrative prices. Both averages smooth the same series over the same span.
Simple versus exponential averages. Both lines average the last eight prices, but the exponential version gives the newest prices the most weight while the simple version treats them all alike. That is why the exponential line bends first when price turns and then tracks it more closely.

A 50-period simple moving average adds the last 50 closes and divides by 50. Each new bar drops the oldest value and adds the newest, which is why the line can move sharply when a large old value falls out of the window even if today's price barely changed.

It is the most widely watched smoothing in markets, and the 50, 100 and 200 period versions on daily charts are followed by enough participants that they occasionally behave like real levels through sheer attention. See moving-average-as-support.

Its defining property is indicator-lag: the line is by construction an average of the past, so it turns after price does, by roughly half the window length. No parameter choice removes this. Anyone claiming a moving average predicts anything has misunderstood the arithmetic.

Related: exponential-moving-average, moving-average, indicator-lag, moving-average-crossover, lookback-period

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