Types of Index MAs Moving Averages - SMA, EMA, LWMA & SMMA

There are 4 types of Stock Index moving averages:

Simple moving average
Exponential Indices moving average
Smoothed Index moving average
Linear weighted Index moving average

The difference between these 4 moving averages is the weight assigned in to the most recent price data.

Simple Moving Average - SMA Indicator

Stock Index SMA indicator applies equal weight to the Index data used to calculate the simple moving average and is calculated by summing up the price periods of a Index chart & this value is then divided by the number of such price periods. For illustration simple moving average 10, adds the price data for the last 10 price periods and divides them by 10.

Exponential Moving Average - EMA Indicator

Stock Index EMA indicator applies more weight to the most recent price data and is calculated by assigning the latest price values more weight based on a percent P, multiplier that's used to multiply & assign more weight to the latest price data.

Linear Weighted Moving Average - LWMA Indicator

Stock Index LWMA indicator moving averages applies more weight to the most recent price data and the latest data is of more value than earlier price data. Linear Weighted Index moving average is calculated by multiplying each of the closing price within the series, by a certain weight coefficient.

Smoothed Moving Average - SMMA Indicator

Stock Index SMMA Indicator is calculated by applying a smoothing factor of N, smoothing factor is composed of N smoothing for N price periods.

The chart example below shows SMA, EMA & LWMA. The SMMA Index moving average isn't commonly used so it is not shown below.

LWMA trading indicator reacts fastest to price data, followed by the EMA & then the SMA.

How to Trade stock index with MAs Moving Averages - SMA, EMA, LWMA & SMMA. Types of Stock Index MAs Moving Averages

SMA, LWMA, EMA - Types of Index MAs - SMA, EMA & LWMA

Day Trading Index with Exponential and Simple Moving Averages

The SMA & EMA Index moving averages are the most commonly used Moving averages to trade Indices. Whereas the EMA Index moving average has got a more sophisticated formula of calculation, its more popular than the SMA Index moving average.

Simple Moving Average is the arithmetic mean average of closing prices in the price period based on the set time period where each time period is added and then it's divided by the number of the price periods selected. If 10 is the price period used the price for the last ten Index price periods added up then it's divided by 10.

SMA indicator is the result of a simple arithmetic mean average. Very simple and some Stock Index traders tend to associate with the trend since it closely follows Index price action.

EMA on the other hand uses an acceleration factor & it's more responsive to the trend.

The SMA Index moving average is used in Index charts to analyze price action. If the price action in more than 3 or 4 time price periods the SMA then its an indication that long Index trades should be closed immediately & the bullish momentum of the buy trade is waning.

The shorter the SMA price period the faster it is to respond to Indices price change. SMA indicator can be used to illustrate direct information regarding the trend of the market price & the momentum by looking at its slope, steeper or more pronounced slope of the SMA is, stronger the trend.

The Exponential Moving Average is also used by many Index traders in the same way but it reacts faster to the market moves and therefore it's more preferred by some Stock Index traders.

The SMA & EMA can also be used to generate entry & exit points when Index trading. These Moving averages can also be combined with Fibonacci and ADX indicators to generate confirmation the signals generated/derived by these moving averages.

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