Description:
The Smoothed Moving Average (SMA) is a technical analysis tool used by traders to analyze price trends of financial assets. It is a variant of the Simple Moving Average (SMA) that uses a longer period and applies more weight to recent data points, smoothing out the price movements and providing a more accurate picture of the underlying trend.
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 with reference to the current candle, to access the current candle data we will use the offset value of "0", to access previous candle data "-1" offset value 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:
- Bullish/Bearish Crossovers: One popular strategy is to use SMA crossovers to identify buy and sell signals. When a short-term SMA (such as a 50-day SMA) crosses above a longer-term SMA (such as a 200-day SMA), it may indicate a bullish trend, while a cross below may indicate a bearish trend.
- Stop Loss: Another strategy is to use SMA as a trailing stop loss. By setting the stop loss at a certain distance from the SMA, traders can protect their profits and limit their losses.
- Entry/Exit Points: SMA can be used to identify potential entry and exit points by analyzing price movements in relation to the SMA.
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.