Moving Averages Explained: SMA vs EMA and How to Use Them

A moving average takes the average closing price over a set number of periods and plots it as a smooth line, filtering out candle-to-candle noise so the underlying trend direction is easier to see. A 50-period moving average, for example, averages the last 50 candles’ closes.

A Simple Moving Average (SMA) weights every period in that window equally. An Exponential Moving Average (EMA) weights recent prices more heavily, which makes it react faster to new price action, at the cost of reacting to noise more too. Neither is objectively better, it depends on whether you want smoothness or responsiveness.

Price trading above a rising moving average is commonly read as an uptrend, and below a falling one as a downtrend. Traders also watch crossovers between a shorter and longer moving average, for example a 20-period crossing above a 50-period, as a signal that the shorter-term trend is shifting relative to the longer-term one.

Moving averages are lagging by nature, since they are built from past prices, so they confirm a trend rather than predicting a new one before it starts. The Tradeskill’s charts include both SMA and EMA for free on every crypto pair, so you can practice reading trend direction and crossovers on live and historical data with $20,000 in virtual cash.