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Trend Indicators

SMA - Simple Moving Average

Learn SMA strategy, crossovers, and how GarudaAlgo uses multiple SMAs for trend analysis.

What is SMA?

The Simple Moving Average (SMA) is a technical indicator that averages price data over a specific period. It is 'moving' because the data is updated as each new candle closes.

SMA helps smooth out price fluctuations (noise) to clearly identify the underlying market trend.

SMA Formula:

SMA = (P1 + P2 + ... + Pn) / n

Example: 5-period SMA = (10+12+13+12+11) / 5 = 11.6

How to Interpret

Price vs Moving Average

  • Price above MA: Bullish bias - uptrend
  • Price below MA: Bearish bias - downtrend
  • Price crossing MA: Potential trend change

Crossovers

Golden Cross

Fast MA crosses above slow MA

Indicates bullish momentum shift

Death Cross

Fast MA crosses below slow MA

Indicates bearish momentum shift

Dynamic Support/Resistance

  • Uptrend: MA acts as dynamic support - price bounces off it
  • Downtrend: MA acts as dynamic resistance - price gets rejected
  • Key levels: 50 and 200 MA are widely watched by institutions

How GarudaAlgo Uses SMA

GarudaAlgo Enhancement

GarudaAlgo uses a multi-MA ribbon (9, 21, 50, 100, 200) to identify trend strength and direction. When MAs are stacked in order, it indicates a strong trend. We also track MA compression before breakouts.

SMA in Signal System

SMA analysis is part of the 14% Trend Analysis weight in GarudaAlgo's signal system.

What GarudaAlgo Analyzes

  • MA Stack Order: Bullish stack (9>21>50>100>200) or bearish
  • Crossover Detection: 9/21, 21/50, 50/200 crosses
  • Price Position: Above or below key SMAs
  • MA Slope: Rising, falling, or flat
  • MA Compression: SMAs bunching together before breakout
  • Distance from MA: Extended moves often revert to SMA

Trading Strategies

Strategy 1: SMA Crossover

  1. Use 9 and 21 Moving Averages
  2. Buy when 9 crosses above 21
  3. Sell when 9 crosses below 21
  4. Filter with higher timeframe trend direction

Strategy 2: SMA Pullback

  1. Identify trend direction (price above 50 SMA = uptrend)
  2. Wait for pullback to 21 SMA in uptrend
  3. Enter long when price bounces off 21 SMA
  4. Stop loss below the 50 SMA

Strategy 3: SMA Ribbon Trend

  1. Plot 9, 21, 50, 100, 200 Moving Averages
  2. Only take trades in direction of ribbon stacking
  3. Strongest trends have perfect stacking order
  4. Avoid trading when ribbon is compressed or twisted

Best Practices

  • Combine with other indicators — SMA alone gives many false signals
  • Respect the 200 SMA — It's watched by institutions globally
  • Use multiple timeframes — Align trades with higher timeframe SMA direction
  • Don't chase extended moves — Wait for pullbacks to SMA
  • Watch for compression — SMA bunching = big move coming
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