Simple Moving Average (SMA)

A technical indicator that calculates the arithmetic mean of a security's closing price over a specified number of periods. A 20-day SMA, for example, adds up the last 20 closing prices and divides by 20. Traders use SMAs to identify trends, dynamic support and resistance levels, and crossover signals. The SMA treats all data points equally, unlike the exponential moving average (EMA), which gives more weight to recent prices.