IN PLAIN ENGLISH
Add up the last N closing prices and divide by N. The line smooths out daily noise and shows the underlying direction a price has been trending. A rising SMA means the average price has been going up; a falling SMA means it has been going down.
FULL DEFINITION
The arithmetic mean of a security's closing prices over a specified number of periods, recalculated each day as the window moves forward in time.
EXAMPLE
SMA 20 on a £50 stock: add the last 20 closing prices, divide by 20. If prices have been rising, the SMA line slopes upward. A price crossing above its own SMA 50 is often read as a bullish signal.
Educational content only. It is not personal financial advice.