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.
Calculate the Simple moving average, when time period is 3 and the closing prices are 25, 85, 65, 45, 95, 75, 15, 35
Closing Prices = 25, 85, 65, 45, 95, 75, 15, 35 Time Period = 3 days
Calculation of SMA from 3rd day to 8th 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
Average A3 = 58.3333 A4 = 65 A5 = 68.3333 A6 = 71.6667 A7 = 61.6667 A8 = 41.6667