Types of Index MAs MAs Moving Averages - SMA, EMA, LWMA & SMMA

There are 4 types of Indices moving averages:

Simple Index moving average
Exponential Indices moving average
Smoothed moving average
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

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

Exponential MA - EMA Indicator

Index 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's used to multiply and assign more weight to the recent price data.

Linear Weighted MA - LWMA Indicator

Index 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 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 out factor is composed of N smoothing for N price periods.

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

LWMA trading indicator reacts fastest to price information, followed by the EMA and then the SMA.

SMA, EMA, LWMA & SMMA MAs Moving Averages Trading Examples Explained Explained

SMA, LWMA, EMA - Types of Index MAs MAs Moving Averages - SMA, EMA and LWMA

Day Trading Index with Exponential & Simple MAs

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

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

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

EMA on the other hand uses an acceleration factor and it's more responsive to the Index trend.

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

The shorter the SMA price period the faster it's to respond to price change. SMA indicator can be used to illustrate direct information regarding the Indices trend of the price & the power by looking at its slope, the steeper or more pronounced the slope of the SMA is, the stronger the Index trend.

The Exponential MA is also used by many Indices traders in the same way but it reacts faster to the Indices market moves & therefore it is more preferred by some Index traders.

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

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