Simple Moving Average
A moving average that weights every period in the window equally.
Formula
SMA = (P1 + P2 + ... + Pn) / n
Unit
₹
In depth
Equal weighting means the oldest price in the window matters as much as today's, and it also means the average jumps when an unusual old value drops out — the drop-off effect, which can make an SMA turn on a day when nothing notable happened. That is the main criticism levelled at it and the reason exponential averages exist. Its compensating virtue is transparency: the value is a plain average of known numbers with no recursion. It is the average most widely quoted in market commentary, so the 50-day and 200-day SMAs are watched by enough participants to matter as reference points.
Worked example
A 5-day SMA of ₹480, 486, 492, 498, 504 is ₹492. If tomorrow's close is ₹504 and the ₹480 rolls out, the new SMA is (486 + 492 + 498 + 504 + 504) / 5 = ₹496.80 — a ₹4.80 rise on an unchanged price.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Simple Moving Average” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.