I notice that there are often lots of confusions on this forum on whether to use SMA (simple moving average) or EMA (Expoential moving average). This results in critcial TA singals to vary greatly amongest folks here.
If you are not familiar with difference between SMA and EMA, please Google it and it takes less than 15 mins to undertsand the basic principal. In general, EMA gives more weight to the recent price action, while SMA gives equal weight to all price action (in the given moving average period).
I usually follow the following 2 simple principals
1: I always use EMA for short term moving average. For example, I use EMA for 5D, 9D, and 21D moving average. The reason is that these moving average are meant for short term indicators and I have found SMA in such a short time window tends to lag too much
2: When it comes to 50D and 200D, I tend to use EMA in a general bull market, and SMA in a general bear market. The reason behind this is that, people tend to be more aggresive in a bull market, so EMA gives us early indication on support or breakthrough. While in bear market, people tend to be more cautious, and SMA, while a bit more lagging than EMA, is safer than EMA.
Anyone has other general recommendation as to when to use SMA vs EMA?
