SMA Indicator (simple Moving Average)

SMA indicator description

Probably, there are no players who have never heard or met in their trading activity such instrument as “moving average”. On the contrary, it is often the beginning of full-fledged work on the market, search of trends. And it is popular both on forexas well as in binary options – This is where it is most often used, both alone and as part of multiple strategies.

SMA (Simple Moving Average) is that basic player’s tool, which will allow him to get a number of advantages at the first stage of work, learn to understand the market, to get results from it. It is one of the subtypes of the Moving Average, it is called “simple moving average” and is actively used when it is important to understand the dynamics of assets.

This tool generates such an important value as the average value of its value for a certain period of time. In this case the player works with the average values of the value for this time interval. By adding the SMA to the work area of the terminal, he will get a simple line that exactly follows the price of the asset, but on some deviation. This tool is a trending tool, it is actively used to identify the current trend. It is especially valuable because it helps to see quite accurately a particular trend and its completion.

SMA is a simple arithmetic moving average, which differs from other MAs in that it has a different weighting factor, which here is assigned to its last indicators – these are the values of the value of some time interval, they are studied with equal weight. Sometimes traders may call the tool an ordinary or even a simple moving average and in principle they are right – it is easy to work with and has the simplest formula in its class.

Log in to your broker’s terminal, add the SMA indicator to the chart and see what comes out

Calculation formula

The calculation of data for this tool is based on summing up the closing value of assets for any number of intervals (for example, 10, 15 hours). Then the index is divided by the number of time intervals. Thus we get the following formula:

SMA = SUM (CLOSE (i), N)/N, where:
SUM – amount;
CLOSE (i) – period closing price;
N is the number of periods.

Advantages of the indicator

This tool is so popular in several markets for a reason. Today, both experienced and novice players work with its indicators. Displaying the data of the average indicator of the asset value for a number of recent time periods, the SMA is able to generate quite serious information, because, according to the basics fundamental and technical The cost information will always be relegated to past average readings.

In addition, it is a versatile tool that can be used both in level systems, and with the figures of technical analysis. By generating accurate signals, the SMA greatly simplifies the process of trading in the market and is able to minimize players’ losses.

It also has the advantage of being simple and does not require any serious knowledge of the principles of market operation to start using it. In addition, the tool has easy settings, which also will not allow the trader to make a mistake at this stage, which will result in losses. The indicator is widely used in the market for different purposes, including complex trading techniques. It is used by traders to track current trends, to understand when a particular trend will end.

Traders have a number of reasons that allow them to turn to this particular tool: it is the ability to quickly detect the current trend or flat state in the market, it also confirms the presence of the trend, predicts future reversals, trend reversals, determines the point of profitable entry into the market. Having chosen one of these working strategies, a trader adds the SMA to the chart and can immediately start trading – signals are easy enough to detect and it is not necessary to spend a lot of time to study it.

How to add SMA to MetaTrader 4?

MT4 contains a set of basic tools for analyzing the dynamics of an asset and the SMA is also part of the basic tools here. Adding it to the terminal is very simple. To do this, you need to find it among the trending tools of the site, by going in the main menu by this way: Indicators – Trending.

Selecting here the Moving Average and clicking on it, you should go to its settings in order to select a specific type of MA, SMA, and to specify the necessary period to work.

Then, after clicking the “OK” button, you can add the tool to the chart and start working with it.

How to add SMA to MetaTrader 5?

The process of adding this indicator to the MT5 platform, which contains the basic functionality of the previous version, looks similar. Here also MA is a basic tool, available for work without installation into the program. To add it to the terminal, you need to find it in the list of instruments of the platform, going to its main menu by the same path: Indicators – Trends.

By clicking on the name of the instrument, it is worth adjusting the indicator to select a specific type of MA, SMA, to specify the required period to work.

Having specified all the necessary parameters in this window, you can click the “OK” button, which will immediately add the tool to the chart and start working with it.

How to add SMA to the broker’s terminal?

• Finmax

In the terminal of this brokerage company now available 4 indicators and MA here is also, moreover, it is in the form of SMA. In order to attach it to the chart, you need to click on the “Indicators” button, located immediately in the main field of the workspace of the site:

Next, in the window that opens, you can see the tools available here.

For the SMA or any other instrument to appear on the chart, just click on its name in this panel. At the same time there is no possibility to perform its settings here.

• Olimp Trade

The platform of this broker (go online) contains many indicators, in addition, there are different kinds of sliders, including the SMA. By clicking on the “Indicators” button, you can add it to your workspace by clicking on its name.

After the trader has clicked on the name of the instrument, its settings menu opens on the left side of the platform, where you can work with the available parameters. Here it is the color of the line, period. All changes are immediately fixed on the chart.

Once the tool is ready to trade, you can close the settings panel and get to work.

• Binomo (bonus 100% to deposit by promo code REVIEWEEK100 – Activate).

Various indicators are also available on the platform of this brokerage company, including the Moving Average. In order to view the list of instruments offered here, you need to click on the “Indicators” button in the bottom panel of the terminal settings.

Clicking this button will open a list of indicators. In order to add one of them to the chart, you only need to click on it.

This will immediately open the instrument settings menu. At the Slips you can easily and simply select the type of indicator, including the SMA, specify the time period, change its color, etc.

Then, after setting up the tool, all you have to do is click the “Build” button and the indicator will immediately appear on the chart.

How to install the indicator in the terminal?

MT4 platform among the basic trend indicators offers and MA, when you add it to the chart you can also choose its type (eg, SMA). However, this indicator is not always found on some platforms and in order to add it to any platform, just find the file with the indicator and install it in the platform. If you don’t have the MA indicator file, download it for free from our website here.

In the MT4 terminal, the indicator files are installed through the data directory as follows:

Once in the terminal, click “Open Data Catalog” in the top menu.

Then go to the folder “MQL4” -> “Indicators”.

Going to the “Indicators” folder, the trader will see a list of instruments installed here.

To add another indicator here, you just need to copy its file to this folder and it will be immediately added to the program. It remains only to restart the program (close and reopen it) and check the availability of the instrument in the platform by going to: “Indicators” -> “Custom”.

SMA trading signals

This tool is most often used to identify such signals:

Intersection of the value and the SMA:

• If the price breaks through the line of a simple moving upwards and closes above it, it is a signal to buy.
• If the price breaks through the SMA from top to bottom and closes lower, it is a sell signal.

Intersection of two or more simple slips:

• If the line of the fast simple sliding (5) crosses the slow one (60) from the bottom upwards, it is time to buy the asset.
• If the fast moving line (5) crosses the slow moving line (60) from top to bottom, it is a sell signal.

SMA Signals in MetaTrader 5

• Intersection of value and SMA

As we have already noted, in case the value line will break the simple moving line from the bottom up and then close above it, it is a signal to buy a contract.

At the same time, if the value line will break the simple moving line from the top down and then close below it, it is a signal to sell the contract.

• Signals of intersection of two SMAs:

In case we observe that the fast moving line crosses the slow moving line, heading upward from below, we can consider it a reliable sign for buying.

In the same case, if we observe that the fast moving line crosses the slow moving line, heading downward, we can consider it a sign for a productive sale.

SMA Signals in MetaTrader 4

• Signals of crossing the value and SMA lines:

Acquisition of a contract:

Contract Sale:

• Signals of intersection of two simple slides:

Acquisition of a contract:

Contract Sale:

SMA Signals at Finmax

• Signals of intersection of lines of simple sliding and the price:

Acquisition of a contract:

Contract Sale:

SMA Signals at Olimp Trade

• Intersection of lines of simple sliding and the price:

Acquisition of a contract:

Contract Sale:

• Intersection of two simple slides:

Acquisition of a contract:

Contract Sale:

SMA signals in Binomo

• Intersection of the SMA and value lines:

Acquisition of a contract:

Contract Sale:

• Intersection of two simple slides:

Acquisition of a contract:

Contract Sale:

Trading strategies with SMA

• Strategy “Masculine”

As you know, in many ways the goal of working in the market is to constantly solve the difficult task of finding reliable signals. It is important to understand that there is no profit to be made by trying to guess the outcome of trades. Working on the strategy is what can make trading productive. The peculiarity of the “Masculine” system – it is simple, suitable for those who prefer to work with technical analysis, using signals from simple instruments: Alligator, RSI and the simple sliding system we are considering. The profitability of this system is up to 85%, it is a great way for a player to quickly increase his deposit. Here, the simple moving average and RSI will act as a signal filter. The Alligator will inform the player about the beginning of the movement, while the RSI will be useful for finding the moments of trend reversal and its duration. As a result, the accurate basic signal will allow you to start trading with 15-minute expirations, and the additional signal will allow you to start trading with 5-minute contracts.

To purchase UP contracts, expect the following pattern: the RSI should now exhibit an upward trend, crossing above 50, and the Alligator, having broken through the sliding band, should also point upward. To buy DOWN contracts, wait for this pattern: the RSI should now be in a downward trend, crossing 50 and heading down; the Alligator, having broken through the sliding band, is also pointing down.

• “Profit Magnet.”

This simple options trading system also uses simple trailing-edge signals in its work, has a simple principle of use, but allows you to steadily build up profits over 85%. Why is it the intriguing name of the Profit Magnet? Its advantage is in the exact tools used, which make up a smoothly working mechanism that can lead the player to a positive result: the SMA, the Alligator and the RSI.

The alligator here shows those moments when the value, waking up after sleep, shows fluctuations. The SMA is no less important, because it determines the reversal moments and anticipates trends (three lines of the tool with settings of 75, 100, 120 will be needed here); the RSI is used to prevent erroneous entries into trades. As a result of the complex of these tools – the ability to track the upcoming reversal in some direction of the asset and conclude the contract, which will bring the player the ideal outcome of the transaction.

To purchase contracts UP, the system instruments must show the following situation: RSI must break the trend at 50 when rising; Alligator must break the moving average curves when heading upwards. To purchase DOWN contracts, the instruments must show the following situation: RSI must break the trend at 50 on the downside; Alligator must break the moving averages on the downside.

• “Storm.”

This interesting trading system is in some sense a novelty in the field of option trading, although the set of its tools is, of course, familiar to the player. What are the features of the system? It is universal, simple and has a simple principle of operation. At the same time, its accuracy is about 87%, which makes it especially attractive. The system works with various markets, any timeframes and assets. It is based on the use of simple tools: the SMA, MACD and RSI, which together are able to accurately predict the prospect of the asset movement. Thus, the SMA here is needed to identify the trend – its direction and reversal (here we will need two lines of this tool with settings of 25 and 50). It is the type of moving Simple is best combined with other tools. The RSI here, crossing the level of 50, is able to confirm a fresh trend, and the MACD is able to catch the exact moment of market breaks, which will be profitable to enter the trade.

To place an “up” position, the market must show the following pattern: the RSI must break through the 0 level in an ascending direction, thereby indicating the direction of movement; the SMA must cross one another in an ascending direction; the MACD must “agree” with this situation, confirming it by breaking the 0 level in an ascending direction. For the contract to go down, the market must show the following picture: the RSI must break through the 0 level in a downward direction; the SMA must cross one another also in a downward direction; the MACD must again “agree” with this situation, confirming it by breaking through the 0 level in a downward direction.

• “Nosedive.”

Speaking about this trading system, we would like to reiterate that guessing market movements is not a productive method of working with options. Without the use of the basic tools here, the investor is not able to trade positively and talk about stable profits. One of the interesting trading systems, which I would like to recommend to the players – “Nosedive”. Its peculiarity is that it is highly effective (more than 90% resulting trades), but also simple and clear. For work the chart of “Mountain” format is used, the following tools are necessary: SMA (with period settings of 50 – yellow, 25 – red) and RSI.

To buy contracts going up, the following situation must occur in the market: the value must cross the SMA, showing growth; the red sliding line must cross the yellow sliding line, also showing growth; the RSI, crossing the 50 position, shows growth. To buy contracts going down, the market must show the following situation: price must cross the SMA, showing fall; the red sliding line must cross the yellow sliding line, showing fall; the RSI crossing the 50 position also shows fall.

• A simple strategy (15 minutes)

It is an ideal choice for beginner market players, who will be able to use a simple, but at the same time serious tool for market analysis only when they come to the market. Thanks to the optimal 15-minute trading tempo, it is easy to get stable results and an inflow of funds to the deposit. This system uses the SMA (you will need 2 lines with parameters 15 and 10), RSI and MACD.

To buy contracts upwards, the following situation must occur in the market: the RSI must cross the trend when rising; after crossing each other, the MACD muwings diverge, showing growth, the moving average, after crossing, also show growth. For purchase of contracts DOWN in the market the opposite situation described above should arise.