# Simple Moving Average

Learn how to trade stocks with the simple moving average indicator. SMA is a useful technical indicator to find bullish and bearish trade setups.

Moving Average (MA) is one of the most popular and easy-to-use tools available for technical analysts. There are two main types of moving averages: simple moving average and exponential moving average.

How Do We Calculate Simple Moving Average?
A simple moving average is calculated by computing the average closing price of a security over a specified number of periods. For example, a 10-day moving average is calculated by adding the closing price for the last 10 days and dividing the result by 10. 1+2+3+4+5+6+7+8+9+10=55, 55/10 = 5.5 (Assuming that the closing prices for the 10 days are 1-10 consecutively). When you plot the moving average for each date on a graph, it forms a curve.

- A buy signal is triggered when closing prices cross above the moving average (MA).
- A sell signal is triggered when closing prices cross below the moving average (MA).

Example:
Let's look at the stock charts for MSFT and YGE as an example. A buy signal is generated when prices cross above the 10 day moving averageÂ  as circled in 1, 2, 3. A sell signal is generated when price crosses below the 10 day moving average.  