{"id":26281,"date":"2022-07-22T08:00:00","date_gmt":"2022-07-22T12:00:00","guid":{"rendered":"http:\/\/aky.pbv.mybluehost.me\/?p=26281"},"modified":"2022-07-22T09:54:14","modified_gmt":"2022-07-22T13:54:14","slug":"smoothed-moving-average","status":"publish","type":"post","link":"https:\/\/aky.pbv.mybluehost.me\/smoothed-moving-average\/","title":{"rendered":"Smoothed Moving Average (SMMA) Indicator Overview"},"content":{"rendered":"\n

During your trading journey, you will likely come across Smoothed Moving Average (SMMA). It\u2019s a handy indicator tool to know because of its ability to confirm prevailing market trends that help generate buy\/sell signals.<\/p>\n\n\n\n

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What is the Smoothed Moving Average?<\/strong><\/h2>\n\n\n\n

The smoothed moving average<\/strong> is simply a moving average that assigns weight to price data points over a long period. Traders use it to gauge market trends according to a series of averages taken over a given period. As more data becomes available, they recalculate the averages to accommodate newer periods. That\u2019s why we call it a “moving” average.<\/p>\n\n\n\n

Think of the SMMA<\/strong> as a hybrid of its better-known siblings \u2014 the simple moving average (SMA) and the exponential moving average (EMA). The SMA looks at the price of a traded asset and divides it by the given period to be studied, but it all looks at all periods equally. Unlike the EMA, which places more emphasis on recent data.<\/p>\n\n\n\n

The smoothed moving average provides a broader view of things by \u2018smoothing out\u2019 short-term market fluctuations. This added accuracy helps traders confirm market trends quicker.<\/p>\n\n\n\n

The chart below shows the Microsoft (MSFT) stock chart with the SMA (blue), EMA (red), and SMMA (green). All trendlines were plotted within the same period, and yet they show different results on the chart. <\/p>\n\n\n\n

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Microsoft Corp stock chart | Source: tradingview.com<\/a><\/strong><\/figcaption><\/figure>\n\n\n\n

Calculating the Smoothed Moving Average<\/h3>\n\n\n\n

Because it is a combination of both the EMA and the SMA, the formula for calculating the smoothed moving average<\/strong> might come off a bit complex.<\/p>\n\n\n\n

The good news is that the SMMA indicator is available by default on most trading platforms. So you don’t have to worry about the actual formula or calculation; you can just set it up on your charts with one click.<\/p>\n\n\n\n

Nevertheless, let\u2019s walk through the formula anyway. It doesn’t hurt to know how to calculate it. Plus, on the off chance that the SMMA indicator is not readily available on your trading platform, this knowledge will come in handy.<\/p>\n\n\n\n

The formula for calculating the smoothed moving average is:<\/p>\n\n\n\n

SMMA = (SMMA# \u2013 SMMA* + CLOSE)\/N<\/em><\/p>\n\n\n\n

Where<\/p>\n\n\n\n

SMMA# \u2013 the smoothed sum of the previous bar <\/p>\n\n\n\n

SMMA* \u2013 the previous smoothed moving average bar<\/p>\n\n\n\n

CLOSE \u2013 The closing price at the time of calculation <\/p>\n\n\n\n

N \u2013 the number of smoothing periods<\/p>\n\n\n\n

The first period is an SMA. <\/p>\n\n\n\n

By smoothing out the data over a given period, traders and analysts have a more comprehensive overview of the trend minus the deviations attributed to short-term volatility. Additionally, since it gives equal weight to data from past periods, the SMMA <\/strong>can represent economic conditions better than its non smoothed counterparts.<\/p>\n\n\n

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Trading Strategies With The Smoothed Moving Average (SMMA)<\/div><\/div>
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