How to trade using Simple Moving Average.

       

A simple moving average is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes and long-term averages are slow.

SMA can be used to predict trend, decide exit and entry points etc.

You need to use 50 SMA and 30 SMA to analyse the trend(Industry standard).

If short term SMA is above long term SMA, stock is in uptrend and vice verse.

You are buying the stock at a fair value in terms of SMA if you buy the stock close to its SMA.

In the above mentioned chart of SBI, the stock entered a uptrend when price crossed the 50 day SMA, For July,September SMA and price was crossing each other several times indicating a side ways movement. Again SMA cross over happens and new uptrend begins. Once again stock can go side ways or downways if it break the 296.00 (50 day SMA).