Moving average is price average value for specific time period. This is usually employed as assistance to determine the current trends of market condition. Generally speaking, there are 4 moving average types used by traders internationally: Simple moving average (MA), Exponential Moving Average (EMA), Linear Weighted Moving Average (LWMA) and Smoothed Moving Average (SMA).
The critical difference among the four lies on the formulas. MA is the original price average value in the specific period. EMA and LMWA are price movement average values in specific period. While EMA is more focused on the last movement, LWMA is much more responsive to last movement as well as the closing price. Last but not the least, Smoothed Moving Average is the price average value with additional formulas to achieve tighter distance among the points. Below are examples of each.
Moving Average ;
MA
EMA
LWMA
SMA
Price could be categorized as bullish trend if it stays above MA. Otherwise, it will be classified as bearish trend. There are particular time parameters used by traders. Those include 50 MA, 100 EMA and 200 SMA. The combination of these three is usually used as a tool to assess the current trends. Take note to the silver graph below. It is without great difficulty to assess the trends. The price is within medium bullish momentum. As the price is below MA 50, but generally above both EMA 100 and SMA 200. Also, it is notable to see that the three MA are clearly positioned, in which 50 MA is on the peak, followed by EMA 100, and then SMA 200.
This is quite helpful for trader to do the price assessment and determine any possibilities in the actual market. However, the techniques to do price assessment are not limited to the ones explained above. Further information, please click: https://linktr.ee/GP1508
Cheerio,
Khong Cuan
Khong Cuan, previously known as GP1508 in forexfactory, works as a contributor in Sonic Trading System, which has been globally used by numerous traders, has also performed trainings to retail traders in many countries. Khong Cuan also has quite experience as a trader in one of the largest firms in Indonesia.