What are the main advantages and disadvantages of using simple moving average (SMA)?


Traders and analysts always argue, that is more efficient, simple moving average (SMA) and exponential moving average (EMA). However, each of them has strengths and weaknesses.

SPF is the most simple calculation, as the average price over a selected period of time. The main advantage of this technique is that it offers a smoother line that is less prone to whipsawing up and down in response to a small temporary price fluctuations and back. Thus, it provides a more stable level, indicating support or resistance. The weakness of the AGR is that it is slower to respond to rapid price changes that often occur at points of market reversal. SPF often often choose traders and analysts working for a longer time intervals such as daily or weekly charts.

The advantage of EMA is that, being weighed in the most recent price changes, it reacts more quickly to price changes than the SMA does. This is especially useful for traders trying to trade intraday swing highs and lows, as EMA signals of a trend change faster than the SMA does. Simultaneously the disadvantage of greater sensitivity of EMA is that it is more vulnerable to false signals and get the able back and forth. EMA is usually used by intraday traders who trade on shorter time charts such as 15 minute or hourly charts.

Since neither medium is inherently great, the question of what to use, as a rule, settled on the trading style of the user or analytical framework.

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