Moving Averages (SMA & EMA)
Lesson 2 of 127 min6 exercises
Learn · 1/4
The Most Important Indicator
Moving averages are the foundation of technical analysis. They smooth out price action to reveal the underlying trend. Almost every trading strategy incorporates moving averages in some way.
Simple Moving Average (SMA)
SMA = Sum of closing prices ÷ Number of periods
20 SMA: Short-term trend (traders use this)
50 SMA: Medium-term trend (swing traders watch this)
200 SMA: Long-term trend (institutions watch this closely)
When price is above the SMA, the trend is considered bullish. When below, bearish.
20 SMA: Short-term trend (traders use this)
50 SMA: Medium-term trend (swing traders watch this)
200 SMA: Long-term trend (institutions watch this closely)
When price is above the SMA, the trend is considered bullish. When below, bearish.
Learn · 2/4
Exponential Moving Average (EMA)
EMA gives more weight to recent prices, making it more responsive:
9 EMA: Very short-term, used by scalpers
21 EMA: Short-term trend
EMAs react faster to price changes but can give more false signals.
9 EMA: Very short-term, used by scalpers
21 EMA: Short-term trend
EMAs react faster to price changes but can give more false signals.
Example
SMA vs EMA Comparison: - SMA 20: $25.00 (smooth, less reactive) - EMA 20: $25.35 (responds faster to recent rally) If price just jumped, EMA will be higher than SMA
EMAs lead, SMAs lag
Learn · 3/4
Moving Average Strategies
Support/Resistance: Price often bounces off key MAs
Crossovers:
- Golden Cross: 50 SMA crosses ABOVE 200 SMA → Bullish
- Death Cross: 50 SMA crosses BELOW 200 SMA → Bearish
- 9/21 EMA cross: Faster signal for short-term trades
Trend Filter: Only take longs when price > 200 SMA
Crossovers:
- Golden Cross: 50 SMA crosses ABOVE 200 SMA → Bullish
- Death Cross: 50 SMA crosses BELOW 200 SMA → Bearish
- 9/21 EMA cross: Faster signal for short-term trades
Trend Filter: Only take longs when price > 200 SMA
Tip
SUTOK calculates 9 EMA, 21 EMA, 20 SMA, 50 SMA, and 200 SMA automatically. Golden/Death crosses are highlighted as major signals.
Learn · 4/4
Key takeaways
- SMAs are smooth but lag; EMAs are responsive but noisy
- 200 SMA is the most watched level by institutions
- Golden Cross (50>200) is bullish; Death Cross (50<200) is bearish
- Moving averages act as dynamic support/resistance
Next: 6 quick exercises. Miss one and it comes back at the end.