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Chapter 11, Part IV. Which one is better – EMA or SMA? Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 17, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: Well, can you answer – which car is better – a Porsche 911 or a Lincoln Continental? You can ask a reasonable question – for what purposes will you use it…

    So, here is the same. All markets and even different pairs on Forex have different nature, breathe etc. You can see that by different volatility, for instance. Many professional traders spend a lot of time to studing markets and to find the most suitable parameters for an MA among the different types of MAs as well. And all this stuff they apply precisely to their own trading style. That’s why even on the same market two different traders may use with equal success absolutely different parameters for MA. Here is a simple example for you. One trader trades short-term and uses a 3-period SMA, and another one – long term and uses, say, a 25 period EMA. The first trader makes 20 trades per month and second one – 2 trades. But the effectiveness could be almost equal. So, can we say that a 3-period SMA is better than a 25-period EMA? Of course not - if they will exchange MAs with each other, then nobody will be able to make profit.

    What does it mean? When you will start to form your own trading strategy and suddenly find out, that trading with MA is a best way for you – you will have to spend a lot of time to estimate which type of MA to use, which period to use what market or Forex pair to choose and so on. By the way, the same is with any other indicator…

    In general, many traders use several different MAs on chart. They use a slow (with longer period) SMA for the overall picture, and could use a fast (with shorter period) EMA to determine the entry or exit point.
     
    Hamza Samiullah and fran alvarez like this.
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