Details of Moving Average
*Asalam o alaikum* members,
The moving average (MA) is a simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks or any time period the trader chooses.When it comes to the period and the length, there are usually 3 specific moving averages you should think about using:9 or 10 period: Very popular and extremely fast-moving. ...21 period: Medium-term and the most accurate moving average.Moving averages are without a doubt the most popular trading tools. Moving averages are great if you know how to use them but most traders, however, make some fatal mistakes when it comes to trading with moving averages. In this article, I show you what you need to know when it comes to choosing the type and the length of the perfect moving average and the 3 ways how to use moving averages when making trading decisions.
What are the 3 moving averages?
Types of Moving Averages
Simple moving averages apply equal weight to all data points. Exponential and weighted averages apply more weight to recent data points. Triangular averages apply more weight to data in the middle of the moving average period.
What is a good moving average?
EMA or SMA?
At the beginning, all traders ask the same questions, whether they should use the EMA (exponential moving average) or the SMA (simple/smoothed moving average). The differences between the two are usually subtle, but the choice of the moving average can make a big impact on your trading.
What is the differences between EMA and SMA?
There is really only one difference when it comes to EMA vs. SMA and it’s speed. The EMA moves much faster and it changes its direction earlier than the SMA. The EMA gives more weight to the most recent price action which means that when price changes direction, the EMA recognizes this sooner, while the SMA takes longer to turn when price turns.
Keywords
In the end, it comes down to what you feel comfortable with and what your trading style is (see next points). The EMA gives you more and earlier signals, but it also gives you more false and premature signals. The SMA provides less and later signals, but also less wrong signals during volatile times.In my trading, I use an SMA because it allows me to stay in trades longer as a swing trader.
Pros and cons
The Bottom Line. The advantage of the simple moving average is that the indicator is smoothed and, compared to the EMA, less prone to a lot of false signals. The drawback is that some of the data used to compute the moving average might be old or stale.
*Asalam o alaikum* members,
The moving average (MA) is a simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks or any time period the trader chooses.When it comes to the period and the length, there are usually 3 specific moving averages you should think about using:9 or 10 period: Very popular and extremely fast-moving. ...21 period: Medium-term and the most accurate moving average.Moving averages are without a doubt the most popular trading tools. Moving averages are great if you know how to use them but most traders, however, make some fatal mistakes when it comes to trading with moving averages. In this article, I show you what you need to know when it comes to choosing the type and the length of the perfect moving average and the 3 ways how to use moving averages when making trading decisions.
What are the 3 moving averages?
Types of Moving Averages
Simple moving averages apply equal weight to all data points. Exponential and weighted averages apply more weight to recent data points. Triangular averages apply more weight to data in the middle of the moving average period.
What is a good moving average?
EMA or SMA?
At the beginning, all traders ask the same questions, whether they should use the EMA (exponential moving average) or the SMA (simple/smoothed moving average). The differences between the two are usually subtle, but the choice of the moving average can make a big impact on your trading.
What is the differences between EMA and SMA?
There is really only one difference when it comes to EMA vs. SMA and it’s speed. The EMA moves much faster and it changes its direction earlier than the SMA. The EMA gives more weight to the most recent price action which means that when price changes direction, the EMA recognizes this sooner, while the SMA takes longer to turn when price turns.
Keywords
In the end, it comes down to what you feel comfortable with and what your trading style is (see next points). The EMA gives you more and earlier signals, but it also gives you more false and premature signals. The SMA provides less and later signals, but also less wrong signals during volatile times.In my trading, I use an SMA because it allows me to stay in trades longer as a swing trader.
Pros and cons
The Bottom Line. The advantage of the simple moving average is that the indicator is smoothed and, compared to the EMA, less prone to a lot of false signals. The drawback is that some of the data used to compute the moving average might be old or stale.
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