Description:
The Simple Moving Average (SMA) is a popular technical analysis tool used by traders to analyze price trends of an asset over a specified period. It is a statistical measure that calculates the average price of an asset over a given period, with each data point equally weighted. The SMA is a crucial tool for traders as it helps them identify market trends, potential support and resistance levels, and determine possible entry and exit points for trades.
Input Parameters:
- Length: Number of periods used in the calculation.
- Offset: The offset value is used to access the data of any candle or indicator concerning the current candle, to access the current candle data it will use the offset value of "0", to access previous candle data "-1" offset value will be used, access data of previous to previous "-2" will be used.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Case:
- Support/Resistance Levels: SMA values above the current price indicate resistance levels, while values below the current price indicate support levels. Traders can identify trends by observing the direction of the moving average.
- Trend Identification: A rising SMA indicates that the trend is gaining momentum, while a falling SMA indicates that the trend is losing momentum. Traders can also use the intersection of two SMAs to identify potential entry and exit points.
- Bullish/Bearish Crossovers: When the short-term SMA crosses above the long-term SMA, it can be interpreted as a bullish signal, while a bearish signal occurs when the short-term SMA crosses below the long-term SMA. The SMA can also be used to identify potential support and resistance levels by analyzing historical data and identifying key price levels that coincide with SMA values.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Dynamic Alerts
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.