How To Trade - SMA, EMA, LWMA and SMMA, and How Does It Work

There are 4 main types of MA:

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

SMA
Simple moving averages apply equal weight to the prices used to calculate the average. SMA is calculated by summing up the price periods and this value is divided by the number of such periods.

EMA
Exponential moving averages apply more weight to the most recent price data. Exponential moving averages are calculated by assigning the latest price values more weight based on a percent P.

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

SMMA
The smoothed moving average is calculated by applying a smoothing factor of N, the smoothing factor is composed of N smoothing periods.

SMA is the arithmetic mean of the closing prices in the period based on the set time period where each time period the price is added and then it is divided by the number of time periods chosen. SMA is the result of a simple arithmetic average. Very simple and some forex traders tend to associate with the forex trend since it closely follows price action. EMA on the other hand uses an acceleration factor and it is more responsive to the trend.

The SMA and EMA can also be used to generate entry and exit points.