How to Use Moving Averages Part -I

Introduction
The Moving Average is one of the classical and most reliable tool for technical  analysis.A Moving Average is an indicator that shows the average value of a security's price over a period of time. When calculating a moving average, a mathematical analysis of the security's average value over a predetermined time period is made. As the security's price changes, its average price moves up or down. Moving averages can be calculated on any data series including a security's open, high, low, close, volume, or another indicator. The critical element in a moving average is the number of time periods used in calculating the average. The key is to find a moving average that will be consistently profitable.
There are two popular types of moving averages:

1. Simple Moving Average (SMA)
2. Exponential Moving Average (EMA)

The only significant difference between the EMA and SMA is the weight assigned to the most recent data.

• Simple moving averages apply equal weight to the prices.
• Exponential moving averages apply more weight to recent prices.

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