There’s always a great debate when it comes to which type of moving average investors should use in their trading system. Should it be the simple moving average (SMA) or should it be the exponential moving average (EMA)? While both have their respective advantages and disadvantages, it’s essential to understand the differences between them and be able to properly evaluate which type of moving average is best suited for your own trading style and system. To begin with, a moving average (MA) is a technical analysis tool used to smooth out market noise and help a trader identify trends. It’s calculated by taking the sum of closing prices and dividing it by a set number of periods. Moving averages are simple to calculate and are very popular among traders. The SMA is the most basic type of moving average. It’s calculated by taking the sum of the closing prices over a period of time and then dividing it by the total of periods. The result is data points that are equally spaced out and offer an insight into the general direction of the market. On the other hand, the exponential moving average (EMA) is more complicated to compute. It assigns a greater weight to the more recent period of data, which means that it changes more quickly than the SMA. EMA is used to identify changes in trend rapidly, while the SMA is considered to be more reliable when it comes to measuring longer-term trends. So which type of moving average should an investor choose? The answer depends on what type of trading approach the investor is taking. If they are looking to identify short-term trends, the EMA might be a better choice as it is more sensitive to price movements. On the other hand, longer-term traders will want to opt for the SMA as it is more reliable. Ultimately, it’s up to the individual trader to decide which type of moving average they should utilize in their trading system. Both the SMA and the EMA have their own advantages and drawbacks, and it’s important to think carefully and evaluate which one is best suited in order to get the best results.