SMA: the simple moving average
Caliente Signals · Updated
SMA(50) is the average of the last fifty closes. When the next candle closes, the oldest price drops out, the newest drops in, and it recalculates. The result is a much steadier version of the same price, with the short-term jumpiness averaged away.
Three things get read from it: where price sits relative to it, which way it is sloping, and whether a fast average has crossed a slow one. In the builder those become conditions like price crosses above SMA(200) or SMA(20) crosses above SMA(50). Periods run from 2 to 200.
It lags behind price, and that lag is not a defect. Smoothing and responsiveness are the same dial, and a longer period buys more of the first with less of the second.
Where it struggles
A market going sideways crosses its own moving average again and again. A crossover rule reacts to each of those crossings, and a stretch of chop can produce a long run of trades in quick succession.
When that happens the result stops being about the rule. Costs are charged per trade, so a high trade count moves the outcome on its own. Run the backtest with a fee assumption set before reading anything into the shape of the curve.
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Caliente Signals is an alert tool, not an investment advisor. Nothing on this page is financial advice, and past performance is not indicative of future results.