What Is an SMA Moving Average? Pine Script v6 Guide to Simple Moving Averages
When analyzing price charts, raw candlestick data can appear noisy and difficult to interpret — the Simple Moving Average (SMA) is one of the most fundamental mathematical tools used to smooth that noise and reveal the underlying directional trend of a market. 1. What Is a Simple Moving Average (SMA)? A Simple Moving Average is a statistical calculation that computes the arithmetic mean of a price series over a fixed number of periods. At each bar, the SMA sums the most recent N closing prices and divides by N , producing a single smoothed value that "rolls" forward with each new bar. Mathematical Definition For a window of length $N$, the SMA at time $t$ is defined as: $$\text{SMA}_t = \frac{1}{N} \sum_{i=0}^{N-1} P_{t-i}$$ Where $P_{t-i}$ is the price at bar $t - i$. Every observation within the window receives an equal weight of $\frac{1}{N}$. Numerical Example Consider 5 consecutive closing prices: 10, 12, 11, 13,...
