Types of Stock Indices 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 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 Indices price data.

Simple Moving Average - SMA Stock Indices Indicator

Stock Indices SMA indicator applies equal weight to the Stock Indices data used to calculate the simple moving average and is calculated by summing up the price periods of a Stock Indices chart and 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 Stock Indices price periods and divides them by 10.

Exponential Moving Average - EMA Stock Indices Indicator

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

Linear Weighted Moving Average - LWMA Stock Indices Indicator

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

Smoothed Moving Average - SMMA Stock Indices Indicator

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

The Stock Indices trading chart example 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 price data, followed by the EMA and then the SMA.

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

Day Trading Stock Indices with Exponential and Simple Moving Averages

The SMA and EMA Stock Indices moving averages are the most commonly used Moving averages to trade 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 prices in the Stock Indices 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 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 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 Indices price action.

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

The SMA Stock Indices moving average is used in Stock Indices 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 Stock Indices trade is waning.

The shorter the SMA price period the faster it is to respond to Stock Indices price change. SMA Stock Indices indicator can be used to show direct information regarding the Stock Indices trend of the 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 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 and ADX Stock Indices indicators to generate confirmation the Stock Indices trading signals generated by these moving averages.