Even if you are the investor with mid- or long-term positions, it’s highly recommended to understand the basics of the technical analysis and be ready to use technical signals and indicators for better understanding asset behaviour you invest. And of course, we have a bunch of articles about fundamental indicators you can kindly find the list here.
No more words. Let’s start.
SMA. Simple Moving Average Technical Indicator.
In statistics, a Simple Moving Average (or Moving Average) is a calculation to analyze data points by creating series of averages of different subsets of the full data set. For stocks (or any assets) it is calculated by adding the closing price or a number of time periods and then dividing this total by the number of time periods.
The formula of SMA is easy:
The 50-, 100- and 200-period moving averages are most common for traders and mid-, long-term investors.
EMA. Exponential Moving Average Technical Indicator.
An exponential moving average (or exponentially weighted moving average – EWMA), is a type of infinite impulse response filter that applies weighting factors which decrease exponentially. The weighting for each older datum decreases exponentially, never reaching zero. The graph at right shows an example of the weight decrease. This type of moving average reacts faster to recent price changes than a simple moving average. The 12- and 26-day EMAs are the most popular short-term averages, however, the 50- and 200-day EMAs are used as signals of long-term trends.
The formula for exponential moving average is recursive: