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Know Technical Analysts Preference for EMA or SMA for Predicting Trend

Posted By On 5/12/2009 10:31:00 PM Under ,

1. We will not go into the system of calculation for Exponential moving averages (EMA or Simple moving averages (SMA) and would come to the crux that EMA is more sensitive to recent price movements and is thus more used by Technical analysts to predict short term trends. However point to note is that sensitivity can bring in often false or misleading signals and thus due caution needs to be exercised.

2. Technical analysts in stock market use SMA for predicting medium to long term trends of a stock. As a point to note one must remember that Moving Averages is a useful tool and must be used in conjunction with other indicators to get better and accurate results. One will have to experiment with this data to arrive at a conclusion that particular type of average is best suited for a particular trend and thus for that one has to use live data of the market.

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