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What is SMA (Simple Moving Average)?
MA Cross
SMA (Simple Moving Average) is the most basic moving average, which is a simple average of adding up all closing prices over a certain period and dividing them by the number of periods.
SMA 20 = (sum of last 20 days closing price) / 20
Treat all time periods equally. There are no weights.
SMA vs EMA — the crucial difference
| Compare | SMA (simple) | EMA (index) |
|---|---|---|
| Latest Price | Same as in the past | Larger proportion |
| reaction speed | Slow | Fast |
| Stability | High | low |
| noise | Less | many |
| 200 days of use | General | sometimes |
| Short-term use | unsuitable | Fit |
Conclusion: Long-term (50 days, 200 days) → SMA is more common / Short-term → EMA is suitable
Meaning of each major SMA period
| SMA | Key Roles | who spring |
|---|---|---|
| SMA 20 | Short-term trend, centered on Bollinger Bands | Short term trader |
| SMA 50 | Medium-term trend | Swing Trader |
| SMA 200 | Long-term trend baseline | All traders |
Golden Rule: Above SMA 200 = bull market bias / below = bear market bias
SMA 200 — The most important line in the market
Because millions of traders around the world look at SMA 200, it becomes a self-fulfilling prophecy.
Strong bullish signals:
- Price > SMA 200
- SMA 200 is rising
- Recent rebound of SMA 200 support confirmed
Strong bearish signal:
- Price < SMA 200
- SMA 200 is falling
- Check recent SMA 200 resistance
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Moving average crossover strategy
Golden Cross
SMA 50 breaks through SMA 200 from down to up.
What it means: The medium-term trend is stronger than the long-term trend.
Signal: 🟢 Bullish turn (medium to long term)
Caution: The signal is late → This may occur after it has already increased significantly.
Dead Cross
SMA 50 breaks through SMA 200 from up to down
What it means: The medium-term trend is weakening the long-term trend.
Signal: 🔴 Bearish turn (medium to long term)
Practical tips
SMA 200 bounce buy strategy (swing):
1. Confirm the overall upward trend (SMA 200 rises)
2. Price adjusts to SMA 200
3. Check reversal candle near SMA 200
4. Long entry
This strategy has been proven for decades in bull markets.
Related guides
- EMA moving average →
- MACD (EMA based) →
- Bollinger Bands (based on SMA 20) →
- Liquidation price calculator →
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