Simple Moving Average (SMA)¶
A simple moving average (SMA) is the arithmetic mean of a security's closing prices over a fixed number of periods. Each new session adds the latest close and drops the oldest, so the line advances continuously through time. It is the most widely used trend filter in technical analysis and the baseline against which all other moving average variants are measured.
HOW IT WORKS¶
The SMA divides the sum of closing prices by the lookback window:
SMA = (P₁ + P₂ + … + Pₙ) / n
Every data point carries equal weight regardless of age. Common institutional windows are the 20-day (one trading month), the 50-day (one quarter), and the 200-day (one trading year). Price sustained above a rising SMA defines an uptrend; price below a falling SMA defines a downtrend. Crossovers between the 50-day and 200-day generate the golden cross and the death cross. Because all weights are equal, a large outlier dropping out of the window can shift the SMA even when recent price action is flat — a distortion known as the drop-off effect. The SMA is also a lagging indicator by construction: it confirms trends after they begin and signals exits after they end, which makes it unreliable in sideways, choppy conditions.
IN TAPEBOARD¶
The Tapeboard scanner lets you filter for stocks crossing above or below any SMA in real time. Use the 200-day SMA as a universe filter — long candidates above it, short candidates below it — and apply the 20-day or 50-day as a dynamic support and resistance reference within that filtered list. SMAs feed directly into Bollinger Bands and MACD displays in the terminal, so the same window you set for your SMA overlay propagates consistently across those derived indicators.