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

There are 4 types of Stock Indices moving averages:

1. Simple Stock Indices moving average
2. Exponential Stock Indices moving average
3. Smoothed moving average
4. Linear weighted moving average

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

Simple MA - SMA Indicator

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

Exponential MA - EMA Indicator

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

Linear Weighted MA - LWMA Indicator

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

Smoothed MA - SMMA Indicator

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

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

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

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

Day Trading Stock Indices with Exponential & Simple MAs

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

Simple MA is the arithmetic mean of the closing prices in the Stock Indices price period based on the set time period where each time period is added & then it is divided by the number of time Stock Indices price periods chosen. If 10 is the Stock Indices price period used the price for the last ten Stock Indices price periods added up then it is divided by 10.

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

EMA on the other hand uses an acceleration factor & it is more responsive to the Stock Indices trend.

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

The shorter the SMA price period the faster it is to respond to price change. SMA indicator can be used to show direct information regarding the Stock Indices trend of the market & 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 MA is also used by many Indices traders in the same way but it reacts faster to the Stock Indices market moves & therefore it is more preferred by some Stock Indices traders.

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