What it measures

The simple moving average is the arithmetic mean of the last length prices. It is the baseline every other average is compared with, and it is still the second most used calculation in the strategies the desk screened, partly because Bollinger Bands, the CCI and several oscillators are built on it.

The calculation

SMA = (price 1 + price 2 + … + price n) / n, over the last n bars

Every bar in the window counts the same. When a bar leaves the window it leaves entirely, which gives the SMA its one odd property: it can move today because of a price that happened n bars ago, not because of anything that happened now.

Inputs and defaults

  • Length: 20 is the Bollinger default, 50 and 200 are the ones the financial press quotes. There is nothing special about any of them beyond the number of people watching.
  • Source: close by default.

How it is read

The same way as any average: price above a rising SMA is a trend, a short SMA crossing a long one is a change of trend. The "golden cross" and "death cross" are the 50 crossing the 200, in either direction, and get written about every time they happen.

Where it fails

The SMA lags price by (length − 1) / 2 bars, more than an EMA of the same length, and it reacts to the oldest bar leaving the window as much as to the newest arriving. In a sideways market it crosses price constantly. A rule built on it alone is a bet that trends last longer than half its length.

How the desk reads it

The desk does not read any moving average as a signal on its own: the question is never where the average is, but whether the rule around it survives fees across many coins and timeframes. The 50 and 200 are watched by many people, which is a fact about attention, not about price.

In the desk's screen

Of the 614 screened strategies in the library, 312 (50.8%) use this indicator somewhere in their logic.

129 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.