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URLhttps://www.babypips.com/learn/forex/sma-vs-ema
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Meta TitleSimple vs. Exponential Moving Averages - Babypips.com
Meta DescriptionLearn the difference between simple and exponential moving averages and which to use when trading forex.
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By now, you’re probably asking yourself, Which is better? The simple or the exponential moving average? It’s like choosing between a tortoise and a hare for your racing team. Both have their strengths, but they’ll get you to the finish line very differently! First, let’s start with the exponential moving average . When you want a moving average that will respond to the price action rather quickly, then a short-period EMA is the best way to go. These can help you catch trends very early (more on this later), which will result in higher profit. In fact, the earlier you catch a trend, the longer you can ride it and rake in those profits (boo yeah!). The downside to using the exponential moving average is that you might get faked out during consolidation periods (oh no!). Because the moving average responds so quickly to the price, you might think a trend is forming when it could just be a price spike. This would be a case of the indicator being too fast for your own good. With a simple moving average , the opposite is true. When you want a moving average that is smoother and slower to respond to price action, then a longer period SMA is the best way to go. This would work well when looking at longer time frames, as it could give you an idea of the overall trend. Although it is slow to respond to the price action, it could possibly save you from many fake outs. The downside is that it might delay you too long, and you might miss out on a good entry price or the trade altogether. An easy analogy to remember the difference between the two is to think of a hare and a tortoise. The tortoise is slow, like the SMA, so you might miss out on getting in on the trend early. However, it has a hard shell to protect itself, and similarly, using SMAs would help you avoid getting caught up in fakeouts. On the other hand, the hare is quick, like the EMA. It helps you catch the beginning of the trend, but you run the risk of getting sidetracked by fakeouts (or naps if you’re a sleepy trader). Below is a table to help you remember the pros and cons of each. SMA EMA Pros Displays a smooth chart that eliminates most fakeouts. Quick Moving and is good at showing recent price swings. Cons Slow-moving, which may cause a lag in buying and selling signals More prone to cause fakeouts and give errant signals. When to Use SMA vs. EMA So, which one is better? With moving averages in general, the longer the time period, the slower it is to react to price movement. But with all else being equal, an EMA will track price more closely than an SMA. Because of this, the exponential moving average is typically considered more appropriate for short-term trading. The same attributes that make the EMA more suited for short-term trading limit its effectiveness when it comes to longer-term trading. Since the EMA will move with price sooner than the SMA, it often gets whipsawed , making it less than ideal for triggering entries and exits on “slower” chart timeframes like daily (or longer). The SMA, with its slower lag, tends to smooth price action over time, making it a good trend indicator, allowing it to remain long when the price is above the SMA and short when the price is below the SMA. So SMA or EMA? It’s really up to you to decide. You don’t have to limit yourself to a single type of MA or a single instance of an MA. Many traders plot several different moving averages to give them both sides of the story. They might use a longer-period simple moving average to find out what the overall trend is, and then use a shorter-period exponential moving average to find a good time to enter a trade. There are a number of trading strategies that are built around the use of moving averages. In the following lessons, we will teach you: How to use moving averages to determine the trend How to use multiple moving averages together How moving averages can be used as dynamic support and resistance Time for recess! Go find a chart and start playing with some moving averages! Try out different types and experiment with different periods. In time, you will find out which moving averages work best for you.
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The simple or the exponential moving average? It’s like choosing between a tortoise and a hare for your racing team. Both have their strengths, but they’ll get you to the finish line very differently\! First, let’s start with the **exponential moving average**. When you want a moving average that will respond to the [price action](https://www.babypips.com/forexpedia/price-action) rather quickly, then a short-period EMA is the best way to go. These can help you catch trends very early (more on this later), which will result in higher profit. In fact, the earlier you catch a trend, the longer you can ride it and rake in those profits (boo yeah!). The downside to using the [exponential moving average](https://www.babypips.com/forexpedia/exponential-moving-average) is that you might get faked out during consolidation periods (oh no!). Because the moving average responds so quickly to the price, you might think a trend is forming when it could just be a price spike. This would be a case of the indicator being too fast for your own good. With a **simple moving average**, the opposite is true. When you want a moving average that is smoother and slower to respond to price action, then a longer period [SMA](https://www.babypips.com/forexpedia/simple-moving-average) is the best way to go. This would work well when looking at longer time frames, as it could give you an idea of the overall trend. Although it is slow to respond to the price action, it could possibly save you from many fake outs. The downside is that it might delay you too long, and you might miss out on a good entry price or the trade altogether. An easy analogy to remember the difference between the two is to think of a hare and a tortoise. ![Simple vs. Exponential Moving Average](https://bpcdn.co/images/2016/05/grade4-hare-toirtoise.png) The tortoise is slow, like the SMA, so you might miss out on getting in on the trend early. However, it has a hard shell to protect itself, and similarly, using SMAs would help you avoid getting caught up in fakeouts. On the other hand, the hare is quick, like the EMA. It helps you catch the beginning of the trend, but you run the risk of getting sidetracked by fakeouts (or naps if you’re a sleepy trader). Below is a table to help you remember the pros and cons of each. | | SMA | EMA | |---|---|---| | Pros | Displays a smooth chart that eliminates most fakeouts. | Quick Moving and is good at showing recent price swings. | | Cons | Slow-moving, which may cause a lag in buying and selling signals | More prone to cause fakeouts and give errant signals. | ## When to Use SMA vs. EMA So, which one is better? With moving averages in general, the **longer** the time period, the **slower** it is to react to price movement. But with all else being equal, an EMA will track price more closely than an SMA. Because of this, the exponential moving average is typically considered more appropriate for short-term trading. The same attributes that make the EMA more suited for short-term trading limit its effectiveness when it comes to longer-term trading. Since the EMA will move with price sooner than the SMA, it often gets [whipsawed](https://www.babypips.com/forexpedia/whipsaw), making it less than ideal for triggering entries and exits on “slower” chart timeframes like daily (or longer). The SMA, with its slower lag, tends to smooth price action over time, making it a good trend indicator, allowing it to remain long when the price is above the SMA and short when the price is below the SMA. So SMA or EMA? It’s really up to you to decide. You don’t have to limit yourself to a single type of MA or a single *instance* of an MA. Many traders plot several different moving averages to give them both sides of the story. They might use a longer-period simple moving average to find out what the overall trend is, and then use a shorter-period exponential moving average to find a good time to enter a trade. There are a number of trading strategies that are built around the use of moving averages. In the following lessons, we will teach you: 1. [How to use moving averages to determine the trend](https://www.babypips.com/learn/forex/using-moving-averages) 2. [How to use multiple moving averages together](https://www.babypips.com/learn/forex/moving-average-crossover-trading) 3. [How moving averages can be used as dynamic support and resistance](https://www.babypips.com/learn/forex/dynamic-support-and-resistance) Time for recess! Go find a chart and start playing with some moving averages\! Try out different types and experiment with different periods. In time, you will find out which moving averages work best for you. *Did this content help you?* Please consider [supporting Babypips.com.](https://www.babypips.com/contribute) Your contribution will enable us to keep providing content — for free — to you and others. [**Next Lesson** How to Use Moving Averages to Find the Trend](https://www.babypips.com/learn/forex/using-moving-averages) Elementary #### Your Progress [Sign in](https://www.babypips.com/account/sign-in) to unlock progress tracking. [View All Courses](https://www.babypips.com/learn/forex) 1. Grade 1 [Support and Resistance Levels](https://www.babypips.com/learn/forex/elementary#support-and-resistance-levels) 1. [What is Support and Resistance?](https://www.babypips.com/learn/forex/support-and-resistance) 2. [Trend Lines](https://www.babypips.com/learn/forex/trend-lines) 3. [Trend Channels](https://www.babypips.com/learn/forex/trend-channels) 4. [How to Trade Support and Resistance](https://www.babypips.com/learn/forex/trading-the-lines) 5. [Psychological Levels](https://www.babypips.com/learn/forex/psychological-level) 6. [Summary: Trading Support and Resistance](https://www.babypips.com/learn/forex/summary-trading-support-resistance) 2. Grade 2 [Japanese Candlesticks](https://www.babypips.com/learn/forex/elementary#japanese-candle-sticks) 1. [What is a Japanese Candlestick?](https://www.babypips.com/learn/forex/what-is-a-japanese-candlestick) 2. [Japanese Candlestick Anatomy](https://www.babypips.com/learn/forex/sexy-bodies-and-strange-shadows) 3. [Basic Japanese Candlestick Patterns](https://www.babypips.com/learn/forex/basic-candlestick-patterns) 4. [Single Candlestick Patterns](https://www.babypips.com/learn/forex/lone-rangers-single-candlestick-patterns) 5. [Dual Candlestick Patterns](https://www.babypips.com/learn/forex/double-trouble-dual-candlestick-patterns) 6. [Triple Candlestick Patterns](https://www.babypips.com/learn/forex/triple-candlestick-patterns) 7. [Japanese Candlestick Cheat Sheet](https://www.babypips.com/learn/forex/japanese-candlesticks-cheat-sheet) 8. [Candlesticks with Support and Resistance](https://www.babypips.com/learn/forex/candlestick_with_support_and_resistance) 9. [Common Mistakes That New Traders Make With Japanese Candlesticks](https://www.babypips.com/learn/forex/japanese-candlestick-trading-mistakes) 10. [Summary: Japanese Candlesticks](https://www.babypips.com/learn/forex/summary-of-candlesticks) 3. Grade 3 [Fibonacci](https://www.babypips.com/learn/forex/elementary#fibonacci) 1. [Fibonacci Trading](https://www.babypips.com/learn/forex/fibonacci-who) 2. [How to Use Fibonacci Retracements](https://www.babypips.com/learn/forex/fibonacci-retracement) 3. [Fibonacci Retracements are NOT Foolproof](https://www.babypips.com/learn/forex/when-fibonacci-fails) 4. [How to Use Fibonacci Retracement with Support and Resistance](https://www.babypips.com/learn/forex/combining-fibs-with-support-and-resistance) 5. [How to Use Fibonacci Retracement with Trend Lines](https://www.babypips.com/learn/forex/combining-fibs-with-trend-lines) 6. [How to Use Fibonacci Retracement with Japanese Candlesticks](https://www.babypips.com/learn/forex/combining-fibs-with-candlesticks) 7. [How to Use Fibonacci Extensions to Know When to Take Profit](https://www.babypips.com/learn/forex/fibonacci-extensions) 8. [How to Use Fibonacci to Place Your Stop so You Lose Less Money](https://www.babypips.com/learn/forex/placing-stops-with-fibs) 9. [Summary: Fibonacci Trading](https://www.babypips.com/learn/forex/summary-of-fibonacci) 4. Grade 4 [Moving Averages](https://www.babypips.com/learn/forex/elementary#moving-averages) 1. [What Are Moving Averages?](https://www.babypips.com/learn/forex/silky-smooth-moving-averages) 2. [Simple Moving Average (SMA) Explained](https://www.babypips.com/learn/forex/simple-moving-averages) 3. [Exponential Moving Average (EMA) Explained](https://www.babypips.com/learn/forex/exponential-moving-average) 4. [Simple vs. Exponential Moving Averages](https://www.babypips.com/learn/forex/sma-vs-ema) 5. [How to Use Moving Averages to Find the Trend](https://www.babypips.com/learn/forex/using-moving-averages) 6. [How to Use Moving Average Crossovers to Enter Trades](https://www.babypips.com/learn/forex/moving-average-crossover-trading) 7. [How to Use Moving Averages as Dynamic Support and Resistance Levels](https://www.babypips.com/learn/forex/dynamic-support-and-resistance) 8. [How to Use Moving Average Envelopes](https://www.babypips.com/learn/forex/how-to-use-moving-average-envelopes) 9. [How to Analyze Trends With Moving Average Ribbons](https://www.babypips.com/learn/forex/moving-average-ribbon) 10. [How to Trend Trade with Guppy Multiple Moving Average (GMMA)](https://www.babypips.com/learn/forex/guppy-multiple-moving-average) 11. [Summary: Using Moving Averages](https://www.babypips.com/learn/forex/summary-of-moving-averages) 5. Grade 5 [Popular Chart Indicators](https://www.babypips.com/learn/forex/elementary#common-chart-indicators) 1. [How to Use Bollinger Bands](https://www.babypips.com/learn/forex/bollinger-bands) 2. [How to Use BBTrend](https://www.babypips.com/learn/forex/bbtrend-by-john-bollinger) 3. [How to Use Keltner Channels](https://www.babypips.com/learn/forex/keltner-channel) 4. [How to Use the MACD Indicator](https://www.babypips.com/learn/forex/macd) 5. [How to Use Parabolic SAR](https://www.babypips.com/learn/forex/parabolic-sar) 6. [How to Use the Stochastic Indicator](https://www.babypips.com/learn/forex/stochastic) 7. [How to Use RSI (Relative Strength Index)](https://www.babypips.com/learn/forex/relative-strength-index) 8. [How to Use Williams %R (Williams Percent Range)](https://www.babypips.com/learn/forex/williams-r) 9. [How to Use ADX (Average Directional Index)](https://www.babypips.com/learn/forex/average-directional-index) 10. [Ichimoku Kinko Hyo](https://www.babypips.com/learn/forex/ichimoku-kinko-hyo) 11. [Trading with Multiple Chart Indicators](https://www.babypips.com/learn/forex/putting-it-all-together) 12. [What is the Best Technical Indicator in Forex?](https://www.babypips.com/learn/forex/best-technical-indicator-forex) 13. [Summary: Popular Chart Indicators](https://www.babypips.com/learn/forex/summary-common-chart-indicators) School of Pipsology Your Overall Progress Report Lessons Completed 267 of 446 [**Unlock Tracking**, Sign In](https://www.babypips.com/account/sign-in) Partner Center [![The5ers](https://bpcdn.co/photos/native_ads_broker_sponsor_ads/4/original/f19a909f0a123e9c3c3369ccc4c7cc13.png)](https://www.babypips.com/na/bs/4 "The5ers") [![TV](https://bpcdn.co/photos/native_ads_broker_sponsor_ads/1/original/ff12f446a3d64fbce696d9a2a356504c.png)](https://www.babypips.com/na/bs/1 "TV") What to Read Next... 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By now, you’re probably asking yourself, Which is better? The simple or the exponential moving average? It’s like choosing between a tortoise and a hare for your racing team. Both have their strengths, but they’ll get you to the finish line very differently\! First, let’s start with the **exponential moving average**. When you want a moving average that will respond to the [price action](https://www.babypips.com/forexpedia/price-action) rather quickly, then a short-period EMA is the best way to go. These can help you catch trends very early (more on this later), which will result in higher profit. In fact, the earlier you catch a trend, the longer you can ride it and rake in those profits (boo yeah!). The downside to using the [exponential moving average](https://www.babypips.com/forexpedia/exponential-moving-average) is that you might get faked out during consolidation periods (oh no!). Because the moving average responds so quickly to the price, you might think a trend is forming when it could just be a price spike. This would be a case of the indicator being too fast for your own good. With a **simple moving average**, the opposite is true. When you want a moving average that is smoother and slower to respond to price action, then a longer period [SMA](https://www.babypips.com/forexpedia/simple-moving-average) is the best way to go. This would work well when looking at longer time frames, as it could give you an idea of the overall trend. Although it is slow to respond to the price action, it could possibly save you from many fake outs. The downside is that it might delay you too long, and you might miss out on a good entry price or the trade altogether. An easy analogy to remember the difference between the two is to think of a hare and a tortoise. ![Simple vs. Exponential Moving Average](https://bpcdn.co/images/2016/05/grade4-hare-toirtoise.png) The tortoise is slow, like the SMA, so you might miss out on getting in on the trend early. However, it has a hard shell to protect itself, and similarly, using SMAs would help you avoid getting caught up in fakeouts. On the other hand, the hare is quick, like the EMA. It helps you catch the beginning of the trend, but you run the risk of getting sidetracked by fakeouts (or naps if you’re a sleepy trader). Below is a table to help you remember the pros and cons of each. | | SMA | EMA | |---|---|---| | Pros | Displays a smooth chart that eliminates most fakeouts. | Quick Moving and is good at showing recent price swings. | | Cons | Slow-moving, which may cause a lag in buying and selling signals | More prone to cause fakeouts and give errant signals. | ## When to Use SMA vs. EMA So, which one is better? With moving averages in general, the **longer** the time period, the **slower** it is to react to price movement. But with all else being equal, an EMA will track price more closely than an SMA. Because of this, the exponential moving average is typically considered more appropriate for short-term trading. The same attributes that make the EMA more suited for short-term trading limit its effectiveness when it comes to longer-term trading. Since the EMA will move with price sooner than the SMA, it often gets [whipsawed](https://www.babypips.com/forexpedia/whipsaw), making it less than ideal for triggering entries and exits on “slower” chart timeframes like daily (or longer). The SMA, with its slower lag, tends to smooth price action over time, making it a good trend indicator, allowing it to remain long when the price is above the SMA and short when the price is below the SMA. So SMA or EMA? It’s really up to you to decide. You don’t have to limit yourself to a single type of MA or a single *instance* of an MA. Many traders plot several different moving averages to give them both sides of the story. They might use a longer-period simple moving average to find out what the overall trend is, and then use a shorter-period exponential moving average to find a good time to enter a trade. There are a number of trading strategies that are built around the use of moving averages. In the following lessons, we will teach you: 1. [How to use moving averages to determine the trend](https://www.babypips.com/learn/forex/using-moving-averages) 2. [How to use multiple moving averages together](https://www.babypips.com/learn/forex/moving-average-crossover-trading) 3. [How moving averages can be used as dynamic support and resistance](https://www.babypips.com/learn/forex/dynamic-support-and-resistance) Time for recess! Go find a chart and start playing with some moving averages\! Try out different types and experiment with different periods. In time, you will find out which moving averages work best for you.
Shard7 (laksa)
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