Smoothed Moving Average (SMMA)

Name Type Prerequisite Use Cases
Smoothed Moving Average (SMMA) Trend OHLC Data Long-term trend smoothing for position trading.

Definition

The Smoothed Moving Average (SMMA) is a moving average that gives equal weight to recent prices but over a much longer period than the SMA. It is equivalent to an EMA with a specific smoothing factor, effectively reducing noise.

Mathematical Equation

\[ SMMA_i = \frac{\sum_{j=1}^{n} P_{i-j+1} - SMMA_{i-1} + P_i}{n} \]

Or simply synonymous with the RMA (Running Moving Average) used in RSI.

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: 0
  • Behavior: Follows the price, offering a smoother average than EMA but with more lag.

Visualization

SMMA

Trading Significance

  1. Long-term Trend: Very slow to react, good for identifying long-term trend direction.

  2. Support/Resistance: Acts as a robust support line in established trends.