The calculation does not refer to a fixed period, but rather takes all available data series into account. What is the Smoothed Moving Average (SMMA)Ī Smoothed Moving Average is an Exponential Moving Average, only with a longer period applied. An exponential moving average tends to be more responsive to recent price changes as compared to the simple moving average which applies equal weight to all price changes in the given period.įor traders who are quite aggressive and hold positions for relatively short amounts of time, the EMA is preferable as it gives ample opportunity for traders to enter positions, however this does come with a larger proportion of false signals – reinforcing the requirement for excellent risk management skills to mitigate this downside. The largest difference between the EMA and the SMA is the responsiveness of the direction of the MA to a change in price, in other words its sensitivity. The exponential moving average ( EMA) is a weighted average of the last n prices, where the weighting decreases exponentially with each previous price/period. What is the Exponential Moving Average (EMA) The SMA moves much slower than other MA’s and it can keep you in trades longer when there are short-lived price movements and erratic behaviour. ![]() However, this is also a double-edged sword for the SMA is also very slow. There is no added complexity to generate false signals through a flaw in its underlying process. This leads the SMA getting you into trades later, when there is a higher probability of success however this will of course vary by strategy. Whilst some other MA’s such as the EMA may immediately start turning during a retracement – signalling a change in direction way too early, the SMA will not. The SMA value equals the average price for the number of periods in the SMA calculation. ![]() The advantage of an SMA is in its name, it is simple. The simple moving average ( SMA) calculates an average of the last n prices, where n represents the number of periods for which you want the average. It is known as a ‘lagging indicator’ because it uses only historical values of the underlying assets, no projections are made in the calculations, to show the trend.ĭifferent Types of Moving Averages What is the Simple Moving Average (SMA) It is called a “moving” average because as new price data becomes available, the total average is recalculated – differing from a static average which is calculated only once. What are Moving Averages? What is a Moving Average?Ī moving average is a technical indicator that sums up the data points of a financial security over a specific time period and divides the total by the number of data points, hence the average. the definition of median prices is very simple, but why it holds value will be missed amongst most traders. The emphasis should be more on why it actually holds relevance. When writing the explanations, there is limited scope for explanation for some points. How to choose averaging periods to use (global).Usefulness of Moving Average shifts (horizontal) (global).Why are Moving Averages useful vs other choices? (per choice).TEMA – Triple Exponential Moving Average.DEMA – Double Exponential Moving Average.Remarks on Price Forms in Moving Averages.Price forms used to calculate Moving Averages.What is the Triangular Moving Average (TMA). ![]() What is the Triple Exponential Moving Average (TEMA).What is the Double Exponential Moving Average (DEMA).What is the Adaptive Moving Average (AMA). ![]()
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