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Moving Averages & MACD Oscillators > Moving Average Types > Simple Moving Average
Indicator Guide > Moving Average Types > Simple Moving Average
Indicators A ~ Z > Q ~ U > Simple Moving Average
Contents > Q ~ U > Simple Moving Average

Simple Moving Average

The simple moving average is easy to construct, but not always the most accurate. They have a tendency to "bark twice" — as in the example below.

Simple Moving Average Formula

To calculate a 5 day simple moving average ("SMA"), take the sum of the last 5 days prices and divide by 5.

Day 1 2 3 4 5 6 7 8 9
Price ($) 16 17 17 10 17 18 17 17 17
5 Day SMA         15.4 15.8 15.8 15.8 17.2

On day 9 there is a big step in the simple moving average, but price has been constant at $17. The low price on day 4 not only causes a drop in the simple moving average on day 4, but also distorts the moving average on day 9 — causing a jump in value when the low price is dropped from the moving average period. That is what is commonly referred to as "barking twice.



 
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