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