By now, you’re probably asking yourself, which is better?

The simple or the exponential moving average?

First, let’s start with the **exponential moving average**.

When you want a moving average that will respond to the price action rather quickly, then a short period EMA is the best way to go.

These can help you catch trends very early (more on this later), which will result in higher profit. In fact, the earlier you catch a trend, the longer you can ride it and rake in those profits (boo yeah!).

The downside to using the exponential moving average is that you might get faked out during consolidation periods (oh no!).

Because the moving average responds so quickly to the price, you might think a trend is forming when it could just be a price spike. This would be a case of the indicator being too fast for your own good.

With a **simple moving average**, the opposite is true.

When you want a moving average that is smoother and slower to respond to price action, then a longer period SMA is the best way to go.

This would work well when looking at longer time frames, as it could give you an idea of the overall trend.

Although it is slow to respond to the price action, it could possibly save you from many fake outs.

The downside is that it might delay you too long, and you might miss out on a good entry price or the trade altogether.

An easy analogy to remember the difference between the two is to think of a hare and a tortoise.

The tortoise is slow, like the SMA, so you might miss out on getting in on the trend early.

However, it has a hard shell to protect itself, and similarly, using SMAs would help you avoid getting caught up in fakeouts.

On the other hand, the hare is quick, like the EMA. It helps you catch the beginning of the trend but you run the risk of getting sidetracked by fakeouts (or naps if you’re a sleepy trader).

Below is a table to help you remember the pros and cons of each.

SMA | EMA | |
---|---|---|

PROS | Displays a smooth chart which eliminates most fakeouts. | Quick Moving and is good at showing recent price swings. |

CONS | Slow-moving, which may cause a lag in buying and selling signals | More prone to cause fakeouts and give errant signals. |

So which one is better?

With moving averages in general, the **longer** the time period, the **slower** it is to react to price movement.

But with all else being equal, an EMA will track price more closely than an __SMA__ .

Because of this, the exponential moving average is typically considered more appropriate for short-term trading.

The same attributes that make the EMA more suited for short-term trading limit its effectiveness when it comes to longer-term trading.

Since the EMA will move with price sooner than the SMA, it often gets whipsawed, making it less than ideal for triggering entries and exits on “slower” chart timeframes like daily (or longer).

The SMA, with its slower lag, tends to smooth price action over time, making it a good trend indicator, allowing to remain long when the price is above the SMA and short when the price is below the SMA.

So SMA or EMA? It’s really up to you to decide.

You don’t have to limit yourself to a single type of MA or a single *instance* of an MA.

Many traders plot several different moving averages to give them both sides of the story.

They might use a longer period simple moving average to find out what the overall trend is, and then use a shorter period exponential moving average to find a good time to enter a trade.

There are a number of trading strategies that are built around the use of moving averages. In the following lessons, we will teach you:

- How to use moving averages to determine the trend
- How to use multiple moving averages together
- How moving averages can be used as dynamic support and resistance

Time for recess! Go find a chart and start playing with some moving averages!

Try out different types and try experimenting with different periods. In time, you will find out which moving averages work best for you.

Lesson 6: What is a Japanese Candlestick? Lesson 7 :Japanese Candlestick Anatomy Lesson 8:Basic Japanese Candlestick Patterns Lesson 9: Single Candlestick Patterns Lesson 10: Dual Candlestick Patterns Lesson 11: Triple Candlestick Patterns Lesson 12:Japanese Candlestick Cheat Sheet Lesson 13: Candlesticks with Support and Resistance Lesson 14: Common Mistakes That New Traders Make With Japanese Candlesticks Lesson 15: Summary: Japanese Candlesticks

Lesson 16 : Fibonacci Trading Lesson 17: How to Use Fibonacci Retracements Lesson 18: Fibonacci Retracements are NOT Foolproof Lesson 19: How to Use Fibonacci Retracement with Support and Resistance Lesson 20: How to Use Fibonacci Retracement with Trend Lines Lesson 21: How to Use Fibonacci Retracement with Japanese Candlesticks Lesson 22: How to Use Fibonacci Extensions to Know When to Take Profit Lesson 23: How to Use Fibonacci to Place Your Stop so You Lose Less Money Lesson 24: Summary: Fibonacci Trading

Lesson 25: What Are Moving Averages? Lesson 26: Simple Moving Average (SMA) Explained Lesson 27: Exponential Moving Average (EMA) Explained Lesson 28: Simple vs. Exponential Moving Averages Lesson 29: How to Use Moving Averages to Find the Trend Lesson 30: How to Use Moving Average Crossovers to Enter Trades Lesson 31: How to Use Moving Averages as Dynamic Support and Resistance Levels Lesson 32: How to Use Moving Average Envelopes Lesson 33: How to Analyze Trends With Moving Average Ribbons Lesson 34: How to Trend Trade with Guppy Multiple Moving Average (GMMA) Lesson 35: Summary: Using Moving Averages

Lesson 36: How to Use Bollinger Bands Lesson 38: How to Use the MACD Indicator Lesson 37: How to Use Keltner Channels Lesson 39: How to Use Parabolic SAR Lesson 40: How to Use the Stochastic Indicator Lesson 41: How to Use RSI (Relative Strength Index) Lesson 42: How to Use Williams %R (Williams Percent Range) Lesson 43: How to Use ADX (Average Directional Index) Lesson 44: Ichimoku Kinko Hyo Lesson 45: Trading with Multiple Chart Indicators Lesson 46: What is the Best Technical Indicator in Forex? Lesson 47: Summary: Popular Chart Indicators