After further investigation, I found that the moving averages generated in Advanced Analyzer are exponential moving averages (EMA), rather than simple moving averages (SMA), in other words, I have been using EMA for all my trading calls.
The question I have now is which one is better or more commonly used? SMA or EMA? Sometimes the difference between SMA and EMA is pretty small, sometimes, it is huge, for example, right now for AAPL, SMA50=87.93, EMA50=86.5.
I am debating if I should continue using EMA or switching to SMA. I have checked many charts, and it seems EMAs act better as key S/R than SMAs. On the same subject, since Aug. 16, 2006, NASDAQ has yet to close below EMA50, but it has closed below SMA50 for a total of 5 times now.
So, what do you folks think? SMA or EMA? Thanks!
Saturday, January 27, 2007
SMA or EMA??
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5 comments:
you use whichever one the particular security reacts to. different for all stocks at all times. depends on what everyone is talking about, looking at, or where a stock bounces or reacts.
Flying been busy all week so I wont be doing a review till later on but depending on your style of trading tradestation is much better then other software I have used. I have it set up that whenever I enter a stock for a daytrade my stop is placed at a certain level and my exits are also placed at 1 and 2%. This makes it easy to just watch the action once your in a trade. I still haven't messed around with most of the features especially using the automated strategy yet but will let you know more this week.
bubs:
thanks for the update on your adventure with Tradestation, I hope you will so be able to implement your setup with the program. do keep me updated.
thanks!
After going through more charts of the stocks on my list, I feel that EMA50/200 seems to be a better S/R than SMA50/200, especially when the difference between the two is big. I wonder if anyone disagrees.
The main difference between SMA and EMA is that EMA runs faster. In other word, it is more sensitive than SMA. Either one would work fine, I guess.
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