simple vs exponential moving average
TRANSCRIPT
The Academy of Financial Trading
Simple vs Exponential Moving Average
SMA vs EMA explained
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Simple vs Exponential – what’s the big deal?
The Simple is the most commonly used retail indicator
Simple vs Exponential Moving Average
The exponential is often used among the more advanced trader – it’s roots are somewhat different from the SMA
Both are often used as indications of momentum in a market
They are seen as a ‘lagging’ indicator – so their respective signals are seen to be delayed
SMA vs EMA explained
Let us explore both separately
The Simple Moving Average
We simply take the price over the last given period and then sum to give us the current value of the SMA
This will then give us the current value of the SMA
SMA vs EMA explained
Simple vs Exponential Moving Average
Let’s work through some examples
The Exponential Moving Average
The Exponential Moving Average is used to capture smaller term trends
Given how the EMA is used we can deduce quickly that it is employed by those looking to capture smaller term trends
One might say it has an accelerated reaction to the most recent price – so it let’s us react that little bit quicker
Both are comparable in this sense and we can use a combination of the two for the purposes of confirmation on a signal.Let’s see what they look like in reality
SMA vs EMA explained
Simple vs Exponential Moving Average
The EMA takes into account the most recent price more so than the SMA – so it is more sensitive and adjust quicker
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