Moving averages: SMA vs EMA
How traders use the 20, 50 and 200 averages for trend, support and crossovers.
A moving average smooths price into a single line by averaging the last N closes. A simple moving average (SMA) weights every candle equally; an exponential moving average (EMA) gives more weight to recent candles, so it reacts faster.
The popular settings
- 20 EMA: short-term trend. Strong trends pull back to it again and again.
- 50 EMA/SMA: medium-term trend; widely watched on the 4-hour and daily charts.
- 200 SMA: the long-term line. Many funds only buy above it.
Three ways to use them
Trend direction: price above a rising 50 and 200 = uptrend. When the 20, 50 and 200 are stacked in order, the trend is strong.
Dynamic support and resistance: in a trend, pullbacks to the 20 or 50 EMA are common entry areas.
Crossovers: the 50 crossing above the 200 (a "golden cross") or below it (a "death cross") confirms a change of trend, but late. Use crossovers as confirmation, not as entries.
Educational content only, not financial advice. Trading involves risk of loss.