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Boripat

Ema vs sma, which one is more useful?

Hi,

Many trading strategies out there are based on crossovers, some uses the exponential movin average and while some prefer the simple moving average. I notice the EMA's sensitivity towards price movement is more than the SMA. I want to know why can't you just use the SMA, why do you need the EMA, both are trend indicators.

over 2 years ago

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ForexNinja

The sma treats all periods the same no matter how far in time they are. A candlestick two years ago would have the same weight as yesterday's candle. Meanwhile, the ema puts more weight on "newer" candles. In a way, you could say the ema emphasizes "current" market conditions while the sma provides a more holistic, longer term view. Nothing really is wrong with using just the sma or just the ema or a mixture of both. With enough backtesting and proper tweaking, any kind of trading system could yield profits.

over 2 years ago

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Cyclopip

To add to my buddy forex ninja's answer, just remember that the ema reacts more quickly to recent price action, which can help you enter a trend early if you are using a moving average crossover system. The problem though, is that you might get caught up in a couple of fake outs.

over 2 years ago

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HappyPip

Like forex ninja and cyclopip mentioned, the sma tends to lag a bit but the ema is prone to false signals. If you're looking at shorter-term trend changes, the ema could provide better signals. But if you're focusing on the long-term trends, the sma might be better. Still, it would help to pair these leading indicators with lagging indicators such as stochastics or rsi in order to confirm whether a reversal is taking place or not.

over 2 years ago

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