simple vs exponential moving average

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Page 1: Simple vs Exponential Moving Average

The Academy of Financial Trading

Simple vs Exponential Moving Average

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Page 2: Simple vs Exponential Moving Average

SMA vs EMA explained

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does not take into account your personal circumstances, please do not trade or invest based solely

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person or entity responsible for loss or damages resulting from the content or general advice provided

here by The Academy of Financial Trading, its employees, directors or fellow members. Futures,

Contracts for Difference (CFDs), Options, and spot currency trading have large potential rewards, but

also large potential risks. You must be aware of the risks and be willing to accept them in order to

invest in CFDs and leveraged forex markets. Don't trade with money you can't afford to lose. No

representation is being made that any account will or is likely to achieve profits or losses similar to

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of any trading system or methodology is not necessarily indicative of future results.

Risk Warning

Page 3: Simple vs Exponential Moving Average

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

Page 4: Simple vs Exponential Moving Average

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

Page 5: Simple vs Exponential Moving Average

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

Page 6: Simple vs Exponential Moving Average

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