Types of Energies Trading Moving Averages
There are four types of energies moving averages:
- Simple energies moving average
- Exponential energies moving average
- Smoothed energies moving average
- Linear weighted energies moving average
The difference between these 4 energies moving averages is the weight assigned in to the most recent energies price data.
Simple Moving Average
Energies Trading SMA indicator applies equal weight to the energies data used to calculate the simple moving average and is calculated by summing up the energies price periods of a energies chart and this value is then divided by the number of such energies price periods. For example energies simple moving average 10, adds the energies price data for the last 10 energies price periods and divides them by 10.
Exponential Moving Average
Energies Trading EMA indicator applies more weight to the most recent energies price data and is calculated by assigning the latest energies price values more weight based on a percent P, multiplier that is used to multiply and assign more weight to the latest energies price data.
Linear Weighted Moving Average
Energies Trading LWMA indicator moving averages applies more weight to the most recent energies price data and the latest data is of more value than earlier energies price data. Linear Weighted energies moving average is calculated by multiplying each of the energies closing energies prices within the series, by a certain weight coefficient.
Smoothed Moving Average
Energies Trading SMMA Indicator is calculated by applying a smoothing factor of N, the smoothing factor is composed of N smoothing for N energies price periods.
The energies chart example illustrated and explained below shows SMA, EMA and LWMA. The SMMA energies moving average is not commonly used so it is not shown below.
The LWMA energies indicator reacts fastest to energies price data, followed by the EMA and then the SMA.
SMA, LWMA, EMA - Types of Energies Trading Moving Averages - SMA, EMA and LWMA
Day Energies Trading with Exponential and Simple Moving Averages
The SMA and EMA energies moving averages are the most commonly used Moving averages to trade energies. Whereas the EMA energies moving average has a more sophisticated method of calculation, its more popular than the SMA energies moving average.
Simple Moving Average is the arithmetic mean of the closing energies prices in the energies price period based on the set time period where each time period is added and then it is divided by the number of time energies price periods chosen. If 10 is the energies price period used the energies price for the last ten energies price periods added up then it is divided by 10.
SMA energies indicator is the result of a simple arithmetic average. Very simple and some Energies traders tend to associate with the energies trend since it closely follows energies price action.
EMA on the other hand uses an acceleration factor and it is more responsive to the energies trend.
The SMA energies moving average is used in energies charts to analyze energies price action. If the energies price action in more than 3 or 4 time energies price periods the SMA then it's an indication that long energies trades should be closed immediately and the bullish momentum of the buy energies trade is waning.
The shorter the SMA energies price period the faster it is to respond to energies price change. SMA energies indicator can be used to show direct information regarding the energies trend of the energies market and the strength by looking at its slope, the steeper or more pronounced slope of the SMA is, the stronger the Energies trend.
The Exponential Moving Average is also used by many traders in the same way but it reacts faster to the energies market moves and therefore it is more preferred by some energies traders.
The SMA and EMA can also be used to generate entry and exit points when energies. These Moving averages can also be combined with Fibonacci and ADX indicators to generate confirmation the energies signals generated by these moving averages.
