[B]Student’s Question:[/B]

What’s the difference between a Simple Moving Average and an Exponential Moving Average? Thanks!

[B]Power Course Instructor’s Response:[/B]

A Simple Moving Average (SMA) weights each candle and its corresponding high, low, open and close information equally…none given more significance than any other in the equation.

In an Exponential Moving Average (EMA) more weight is given to the latest data. This type of moving average will react faster to recent price changes.

To see how these differences appear on a chart, take a look at the 4 hour chart of the EURGBP posted below.

The 50 period SMA is in black and the 50 period EMA is in green