Moving Averages Explained: SMA vs. EMA
What Are Moving Averages? Moving averages are one of the most commonly used tools in technical analysis. They smooth out price data to help traders identify trends by reducing the “noise” caused by day-to-day price fluctuations.
Simple Moving Average (SMA): This calculates the average price over a specific period (e.g., 50 days), equally weighing all prices.
Exponential Moving Average (EMA): This type of moving average gives more weight to recent prices, making it more responsive to new information.
How Are They Used? Traders use moving averages to identify potential trend reversals or confirmations. Crossovers between short-term and long-term moving averages can signal buy or sell opportunities.
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