What Are The 4 Major Moving Averages?

Table of Contents

There are several types of moving averages, but the four major ones are:

Simple moving average (SMA): This is the most basic type of moving average, calculated by taking the sum of a set of prices over a certain number of periods and dividing the result by the number of periods. For example, a 10-day SMA would be calculated by adding the closing prices of the past 10 days and dividing the result by 10.
Exponential moving average (EMA): This type of moving average gives more weight to recent prices and is therefore more responsive to changes in the market. It is calculated using a formula that involves both the current and past prices.
Linear weighted moving average (LWMA): This type of moving average assigns more weight to recent prices, similar to the EMA. However, it is calculated differently, using a formula that involves multiplying each period’s price by its position in the series and then dividing the sum of these products by the sum of the weights.
Hull moving average (HMA): This is a type of exponential moving average that is designed to be more responsive to changes in the market and to reduce lag. It is calculated using a formula that involves the average of two EMAs with different periods.

Moving averages can be used in technical analysis to smooth out price data and identify trends. They are often used to generate trade signals, although it’s important to use them in conjunction with other analysis tools to confirm any signals.

Moving averages (MA) are one of the most popular and often-used technical indicators in the financial markets. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks, or any time period the trader chooses.

There are advantages to using a moving average in your trading, as well as options on what type of moving average to use.

The Moving Average Convergence/Divergence indicator is a momentum oscillator primarily used to trade trends. Although it is an oscillator, it is not typically used to identify over bought or oversold conditions.

It appears on the chart as two lines which oscillate without boundaries. The crossover of the two lines give trading signals similar to a two moving average system.