SMA, Exponential Moving Average, Linear Weighted MA & SMMA
There are four types of trading moving averages:
- Simple gold trading MA
- Exponential gold trading MA
- Smoothed gold trading MA
- Linear weighted gold trading MA
The difference between these 4 gold trading moving averages is the weight assigned in to the most recent price data.
SMA Indicator
Gold Simple Moving Average indicator applies equal weight to the trading data used to calculate the simple moving average and is calculated by summing up the price periods of a chart and this value is then divided by the number of such trading price periods. For example trading simple moving average 10, adds the price data for the last 10 price periods & divides them by 10.
EMA Indicator
Gold Exponential Moving Average indicator applies more weight to the most recent price data and is calculated by assigning the latest trading price values more weight based on a percent P, multiplier that is used to multiply and assign more weight to the latest trading price data.
LWMA Indicator
Gold Linear Weighted Moving Average indicator moving averages applies more weight to the most recent price data and the latest data is of more value than earlier trading price data. Linear Weighted gold trading moving average is calculated by multiplying each of the trading closing prices within the series, by a certain weight coefficient.
SMMA Indicator
Gold SMMA Indicator is calculated by applying a smoothing factor of N, the smoothing factor is composed of N smoothing for N trading price periods.
The chart example shown and described below displays Simple Moving Average, Exponential Moving Average and Linear Weighted Moving Average. The SMMA gold moving average is not oftenly used so it is not shown below.
The Linear Weighted Moving Average indicator reacts fastest to trading price data, followed by the Exponential Moving Average and then the SMA.
SMA, Linear Weighted Moving Average, Exponential Moving Average - Types of Moving Averages - Simple Moving Average, Exponential Moving Average and LWMA
Day Trading with Exponential and Simple Moving Averages
The Simple Moving Average and Exponential Moving Average gold trading moving averages are the most commonly used Moving averages to trade gold. Whereas the Exponential Moving Average gold trading moving average has a more sophisticated method of calculation, its more popular than the Simple Moving Average gold trading MA.
Simple Moving Average is the arithmetic mean of the closing prices in the price period based on the set time period where each time period is added and then it is divided by the number of time price periods chosen. If 10 is the price period used the price for the last ten price periods added up then it is divided by 10.
SMA indicator is the result of a simple arithmetic average. Very simple and some traders tend to associate with the trend since it closely follows price action.
EMA on the other hand uses an acceleration factor and it is more responsive to the trend.
The Simple Moving Average gold trading moving average is used in charts to analyze price action. If the price action in more than 3 or 4 time price periods the Simple Moving Average then it's an indication that long trades should be closed immediately and the bullish momentum of the buy trade is waning.
The shorter the Simple Moving Average trading price period the faster it is to respond to trading price change. Simple Moving Average indicator can be used to show direct information regarding the trend of the market and the strength by looking at its slope, the steeper or more pronounced slope of the Simple Moving Average is, the stronger the trend.
The Exponential Moving Average is also used by many traders in the same way but it reacts faster to the market moves and therefore it is more preferred by some traders.
The Simple Moving Average and Exponential Moving Average can also be used to generate entry and exit points when gold trading. These Moving averages can also be combined with Fibonacci and ADX indicators to generate confirmation the signals generated by these moving averages.
