The simple moving average formula is the average closing price of a security over the last “x” periods. Calculating the simple moving average is not something for technical analysis of securities. This formula is also a key tenet to engineering and mathematical studies. This detailed article from Wikipedia [1] delves into formulas for the simple moving average, cumulative moving average, weighted moving average, and exponential moving average
Let’s look at a simple moving average example with Microsoft. The last five closing prices for Microsoft are:
28.93+28.48+28.44+28.91+28.48 = 143.24
Quite simply to calculate the simple moving average formula, you divide the total of the closing prices by the number of periods.
5-day SMA = 143.24/5 = 28.65
I love the fact the SMA is just math.
Every indicator is based on math, but the SMA is not some proprietary calculation with trademark requirements.
It is simple addition and division, for the entire world to share.
Let’s look at a simple moving average example with Microsoft. The last five closing prices for Microsoft are:
28.93+28.48+28.44+28.91+28.48 = 143.24
Quite simply to calculate the simple moving average formula, you divide the total of the closing prices by the number of periods.
5-day SMA = 143.24/5 = 28.65
I love the fact the SMA is just math.
Every indicator is based on math, but the SMA is not some proprietary calculation with trademark requirements.
It is simple addition and division, for the entire world to share.