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