9.3 Simple Moving Averages

Front

What is a Simple Moving Average (SMA)?

Back

A Simple Moving Average (SMA) is a statistical calculation that averages a set of data points over a specified number of periods, smoothing out fluctuations to identify trends.

Front

How is the 5-day SMA calculated?

Back

The 5-day SMA is calculated by adding the closing prices of a stock for the last 5 days and dividing by 5.

Front

Calculate the 5-day SMA for the following prices: $159.35, $161.40, $161.20, $161.40, $161.90.

Back

$161.05

Front

What does a crossover in SMA indicate?

Back

A crossover occurs when a shorter-term SMA crosses above or below a longer-term SMA, indicating potential buy or sell signals.

Front

What is the implication of a crossover on Day 3 in an SMA graph?

Back

If the shorter-term SMA crosses above the longer-term SMA, it suggests a buy signal.

Front

How is the 6-day SMA calculated?

Back

The 6-day SMA is calculated by adding the closing prices of a stock for the last 6 days and dividing by 6.

Front

Calculate the 6-day SMA for the following prices from Day 5 to Day 10: $66.80, $66.65, $66.67, $65.80, $65.92, $65.21.

Back

$66.18

Front

What is the formula for calculating SMA?

Back

SMA = (P1 + P2 + P3 + ... + Pn) / n, where P is the price and n is the number of periods.

Front

Calculate the 3-day SMA for the following prices: $163.25, $162.50, $162.50.

Back

$162.75

Front

What is the significance of the SMA in stock trading?

Back

SMA helps traders identify trends, potential reversals, and support/resistance levels.