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Learn Stock Indices Trading

SMA, EMA, LWMA and SMMA


There are four types of stock indices moving averages:


  1. Simple stock indices moving average

  2. Exponential stock indices moving average

  3. Smoothed stock indices moving average

  4. Linear weighted stock indices moving average


The difference between these 4 stock indices moving averages is the weight assigned in to the most recent stock index price data.


SMA Stock Indices Indicator

Stock Indices Trading SMA indicator applies equal weight to the stock indices data used to calculate the simple moving average and is calculated by summing up the stock index price periods of a stock indices chart and this value is then divided by the number of such stock index price periods. For example stock indices simple moving average 10, adds the stock index price data for the last 10 stock index price periods and divides them by 10.


EMA Stock Indices Indicator

Stock Indices Trading EMA indicator applies more weight to the most recent stock index price data and is calculated by assigning the latest stock index price values more weight based on a percent P, multiplier that is used to multiply and assign more weight to the latest stock index price data.


LWMA Stock Indices Indicator

Stock Indices Trading LWMA indicator moving averages applies more weight to the most recent stock index price data and the latest data is of more value than earlier stock index price data. Linear Weighted stock indices moving average is calculated by multiplying each of the stock indices closing stock indices prices within the series, by a certain weight coefficient.


SMMA Stock Indices Indicator

Stock Indices Trading SMMA Indicator is calculated by applying a smoothing factor of N, the smoothing factor is composed of N smoothing for N stock index price periods.


The stock indices chart example illustrated below shows SMA, EMA and LWMA. The SMMA stock indices moving average is not commonly used so it is not shown below.


The LWMA stock indices indicator reacts fastest to stock index price data, followed by the EMA and then the SMA.

Types of Stock Indices Trading Moving Averages - SMA, EMA and LWMA

SMA, LWMA, EMA - Types of Stock Indices Trading Moving Averages - SMA, EMA and LWMA


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Day Stock Indices Trading with Exponential and Simple Moving Averages

The SMA and EMA stock indices moving averages are the most commonly used Moving averages to trade stock indices. Whereas the EMA stock indices moving average has a more sophisticated method of calculation, its more popular than the SMA stock indices moving average.



Simple Moving Average is the arithmetic mean of the closing stock indices prices in the stock index price period based on the set time period where each time period is added and then it is divided by the number of time stock index price periods chosen. If 10 is the stock index price period used the stock index price for the last ten stock index price periods added up then it is divided by 10.



SMA stock indices indicator is the result of a simple arithmetic average. Very simple and some Stock Indices traders tend to associate with the stock indices trend since it closely follows stock index price action.


EMA on the other hand uses an acceleration factor and it is more responsive to the stock index trend.


The SMA stock indices moving average is used in stock indices charts to analyze stock index price action. If the stock index price action in more than 3 or 4 time stock index price periods the SMA then it's an indication that long stock index trades should be closed immediately and the bullish momentum of the buy stock indices trade is waning.



The shorter the SMA stock index price period the faster it is to respond to stock index price change. SMA stock indices indicator can be used to show direct information regarding the stock indices trend of the stock indices market and the strength by looking at its slope, the steeper or more pronounced slope of the SMA is, the stronger the Stock Indices trend.


The Exponential Moving Average is also used by many stock indices traders in the same way but it reacts faster to the stock indices market moves and therefore it is more preferred by some stock index traders.


The SMA and EMA can also be used to generate entry and exit points when stock indices. These Moving averages can also be combined with Fibonacci and ADX stock indices indicators to generate confirmation the stock indices signals generated by these moving averages.

 

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