SMA vs EMA.
- SMA: the plain average of the last N closes. Smooth and slow.
- EMA: weights recent closes more heavily. Faster, noisier.
- Neither is better — pick one and test it on your market and timeframe.
Three ways traders use them.
- Trend filter: only buy above the 200, only sell below it.
- Pullback entries: in a trend, buy the pullback into the 20 or 50 with a rejection candle.
- Crossovers: fast average crossing slow. Simple, but late, and choppy in ranges.
The common mistake.
When price flattens, averages flatten too and price crosses them repeatedly. A crossover system takes every one. A flat 50-period average is a sign to stand aside, not to trade more.
Risk first.
Moving-average systems have long losing streaks between trends. Risking 0.5% per trade means ten losses in a row costs 5% — inside our 8% maximum drawdown. At 2% per trade the same streak ends the account.
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