What is Simple Moving Average (SMA) ? Well, the basic definition of SMA is that it is the average price of the past 30 days. Yes that's it.
For example, CEI price for the past 30 days are the following:
The total of the price is 2.399, divide it by 29 and that will be your SMA. Take a look at the chart below and focus on the blue color that I encircled. The blue circle is at the .083 price. Our quotient in the above is .083 also. So, they are matching and our SMA in the chart means it is correct. By the way, COL is using 32 days in the chart below.
Now, if tomorrow the closing price is .096, then we will add that .096 in the 30 days and then we will remove the last price of the previous day. See below. The last price is remove and the price tomorrow is added. See below.
The rule is that SMA reflects the price of the stock for the last 30 days. As the days move on, the days in the previous days are removed and the current ones added.
The good thing about the charts is that we do not have to compute the SMA manually. The internet has provided all the tools that makes all calculation simple. Take advantage of it. In the chart above, the SMA is being computed automatically and you dont have anything to do except to analyze the chart.
We can use the SMA to determine the trend of the stock. In the chart above, the trend is going up. If the price goes below .083 tomorrow, then it's a sell signal. You need to be alert in your stock because anytime it can go down further. Why? Well, because the average price for the last 30 days is .083 and if the stock goes below the average price, we need to be wary. Perhaps, people are dumping their shares now and are starting to get out of the stock.
For example, CEI price for the past 30 days are the following:
The total of the price is 2.399, divide it by 29 and that will be your SMA. Take a look at the chart below and focus on the blue color that I encircled. The blue circle is at the .083 price. Our quotient in the above is .083 also. So, they are matching and our SMA in the chart means it is correct. By the way, COL is using 32 days in the chart below.
Now, if tomorrow the closing price is .096, then we will add that .096 in the 30 days and then we will remove the last price of the previous day. See below. The last price is remove and the price tomorrow is added. See below.
The good thing about the charts is that we do not have to compute the SMA manually. The internet has provided all the tools that makes all calculation simple. Take advantage of it. In the chart above, the SMA is being computed automatically and you dont have anything to do except to analyze the chart.
We can use the SMA to determine the trend of the stock. In the chart above, the trend is going up. If the price goes below .083 tomorrow, then it's a sell signal. You need to be alert in your stock because anytime it can go down further. Why? Well, because the average price for the last 30 days is .083 and if the stock goes below the average price, we need to be wary. Perhaps, people are dumping their shares now and are starting to get out of the stock.
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