Moving Averages Complete Guide — SMA vs EMA

What Are Moving Averages?

Moving Averages (MA) are among the most fundamental and widely used technical indicators. They smooth price fluctuations by calculating the average price over a period, helping traders identify trend direction.

SMA vs EMA

Simple Moving Average (SMA)

SMA assigns equal weight to each closing price in the period. For example, a 20-day SMA is the arithmetic average of the last 20 closing prices. Smoother but slower to react.

Exponential Moving Average (EMA)

EMA gives more weight to recent prices, making it more responsive to price changes. Better suited for short-term traders.

Common MA Periods

• Short-term: 5, 10, 20 days — for short-term trading
• Medium-term: 50, 60 days — medium-term trend reference
• Long-term: 120, 200 days — long-term trend and bull/bear boundary

Golden Cross and Death Cross

Golden Cross

Short-term MA crosses above long-term MA — a bullish signal. The classic combination is the 50-day MA crossing above the 200-day MA.

Death Cross

Short-term MA crosses below long-term MA — a bearish signal, often accompanied by significant declines.

MA Slope

The slope (angle) of a moving average reflects trend strength. Steeper slopes indicate stronger trends. When an MA transitions from rising to flat, it suggests the trend may be changing.

Practical Strategies

• MA Support/Resistance: In uptrends, MAs often act as dynamic support
• Multiple MA Alignment: Bullish alignment of short, medium, and long-term MAs is a strong signal
• MA Retest: Price bouncing off an important MA after a pullback is a good entry opportunity