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