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Simple Moving Averages vs Exponential Moving Averages

Simple Moving Averages vs Exponential Moving Averages

Richard Krivo, Trading Instructor

Student’s Question:What’s the difference between a Simple Moving Average and an Exponential Moving Average? Thanks! Instructor’s Response:A Simple Moving Average (SMA) weights each candle and its corresponding high, low, open and close information equally…none is given more significance than any other in the equation.In an Exponential Moving Average (EMA) more weight is given to the latest data. This type of moving average will react faster to recent price changes.To see how these differences appear on a chart, take a look at the historical 4 hour chart of the EURGBP posted below.

Simple_Moving_Averages_vs_Exponential_Moving_Averages_body_28798d1240990064-post-day-chart-4-29-09.png, Simple Moving Averages vs Exponential Moving Averages

The 50 period SMA is in black and the 50 period EMA is in green.

If you would like to learn more about Moving Averages, there is a section in the Daily FX+ Trading course that provides four distinct lessons specifically on this indicator. All FXCM live account holders have access to the course at the following link…

https://plus.dailyfx.com/tnews/index.jsp?ib=fxcm&lang=en

Once there, click on Trading Course.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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