A Simple Moving Average (SMA) sums the closing prices over N periods and divides by N. Every period is weighted equally: a closing price from 199 days ago counts as much as yesterday's close in a 200-day SMA. This makes the SMA easy to understand and replicate, but it also means that a single large price move — which enters and exits the window — can distort the average twice.
The SMA's equal-weighting is both its strength and its limitation. It is the most transparent form of moving average, which matters for widely-followed levels (the 50-day and 200-day SMAs are referenced by institutional traders worldwide). At the same time, the SMA is slower to respond to fresh information than the EMA, because recent days carry no extra emphasis.
The practical implication: SMAs are better for identifying long-run trend levels and historic support zones; the EMA is often preferred for shorter-term signal generation where responsiveness matters more.