Moving average (SMA and EMA)

Trader's Glossary · Indicators

Definition. The average price over a set number of recent periods, moving forward with each new candle. SMA is the simple average; EMA is the exponential one, which gives more weight to the latest data.

How it works

A moving average smooths out price fluctuations and helps you judge the direction and where price sits relative to a longer horizon. Longer-period averages, e.g. daily ones, are watched by many market participants.

Example

Price approaches a multi-day average on the daily chart. For many participants it's an important reference point in the broader context.

What to watch out for

Moving averages lag because they describe the past. Their significance depends on the period, the timeframe and the context.

See also

RSI (Relative Strength Index), VWAP, Support and resistance.

More in Hetman Capital Club

You'll find the full explanation with graphics, examples and exercises in the 🖥️ Order flow atlas space, and its use in the live market in the 🔴 Live Room. Both are available to Club members (in Polish).

Educational content, not investment advice.