Smoothed Moving Average
The Smoothed Moving Average (SMMA) is similar to the Simple Moving Average (SMA) in that it aims to reduce noise rather than reduce lag in asset price data.
The indicator takes all prices into account and uses a long lookback period. Old prices are never removed from the calculation, but they have only a minimal impact on the moving average due to a low assigned weight. By reducing noise, SMMA removes fluctuations and plots the prevailing trend.
SMMA can be used to confirm trends and define areas of support and resistance. It is often used in combination with other signals and analysis techniques.
SMMA = (SMMA1 – SMMA2 + C)/n
SMMA1 = Previous bar’s smoothed sum
SMMA2 = Previous bar’s smoothed moving average
C = Present closing price
n = Period of smoothing