Simple Moving Average on a Live Gold Chart

What it shows

The SMA is drawn right on the candles, in the price pane. Pick a Second line type and another line appears over it, an average of the SMA’s own values. SMA + Bollinger Bands adds an upper and a lower band around that second line.

How Pravex works it out

1. Take the source price of each candle, the close by default.
2. Add up the last N values and divide by N. With the default length of 9 that is the nine latest closes added together, then ÷ 9.
3. Each new candle slides the window one step: the oldest value leaves and the newest enters. Example numbers, not a live price: closes of 10, 12 and 14 with a length of 3 give 12.
4. Until N candles exist, or if any value in the window is missing, the line has no point there.

Settings

Setting	Default	What changing it does
Length	9	The size of the window being averaged. At 9 the line hugs the hourly candles; at 50 it is smoother and trails further behind.
Source	close	Which price is averaged. Switching from the close to hl2 lets a long wick count, which on gold news candles moves the SMA more than the close alone would.
Offset	0	Slides the finished SMA sideways: +3 draws each value three candles later, -3 three candles earlier. The averages stay the same.
Second line type	None	Puts an average of the SMA on top of it: None, SMA, SMA + Bollinger Bands, EMA, SMMA (RMA), WMA or VWMA. Skip VWMA here, because it weights by volume and the gold candles carry none.
Second line length	14	The window of that second line, counted in SMA values. It only appears once a second line type is picked.
Band width in standard deviations	2	Used by the SMA + Bollinger Bands choice only. At 2 the bands sit two standard deviations of the SMA either side of the second line.

How traders read it

The first use is as a reference for the trend. Price staying above a rising SMA says the recent closes have been higher than the average of those before them; price under a falling one says the opposite.

Crossings get the most attention. Price closing back through the line is read as a change in the short-term mood, and traders often put a short SMA and a long one on the same chart and watch where they cross.

The line also works as a loose level. In a steady gold trend, pullbacks often stop near a medium-length SMA, though nothing forces them to.

When it misleads

An average of past closes always lags. A sharp move shows up in the line late, and the line keeps pulling toward old prices after the move is over. In a sideways market price crosses it again and again, and each cross means little. Because every close in the window counts the same, a big old candle leaves the average all at once when it drops out of the window, so the line can jump on a quiet candle.

Questions and answers

What is a simple moving average?

It is the plain average of the last N closes, worked out again on each candle. Pravex starts at N = 9.

Is the 200 SMA worth watching on gold?

On the daily chart it is one of the averages market commentary quotes most, and a line many people watch can draw orders for that reason alone. On 1-hour candles 200 bars is under nine trading days, a much shorter story.

What does Offset do on the SMA?

It slides the drawn line sideways by that many candles, right for a positive number and left for a negative one. It does not change the average itself.

Why did my SMA jump on a quiet candle?

A big candle just left the window. Every close counts the same, so when a large old close drops out the average shifts by its full weight, even if the new candle barely moved.

Related: Moving Average Exponential, Moving Average Weighted, Moving Average Ribbon, Bollinger Bands, every indicator.