How to Calculate SMA - Definition, Example, Formula

Definition :

Simple Moving average is a statistical concept. It is used in calculation of, average of closing price for a time period. SMA is calculated by, adding the closing price of time period and then divide it by number of time period.

Formula :

Where,

n = Number of Data d = Moving Average Days M = Data

Example :

Calculate the Simple moving average, when time period is 3 and the closing prices are 25, 85, 65, 45, 95, 75, 15, 35

Given :

Closing Prices = 25, 85, 65, 45, 95, 75, 15, 35 Time Period = 3 days

Solution :

Calculation of SMA from 3^rd day to 8^th day, in time period of 3 days.

Average A₃ = (25 + 85 + 65) / 3 A₄ = (85 + 65 + 45) / 3 A₅ = (65 + 45 + 95) / 3 A₆ = (45 + 95 + 75) / 3 A₇ = (95 + 75 + 15) / 3 A₈ = (75 + 15 + 35) / 3

Result :

Average A₃ = 58.3333 A₄ = 65 A₅ = 68.3333 A₆ = 71.6667 A₇ = 61.6667 A₈ = 41.6667