Indicators · Beginner

Moving Averages: SMA Vs EMA

Both lines smooth price. Only one of them reacts to a close you can no longer see on the chart.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

A simple moving average weights every close in its window equally, so it reacts partly to the old bar leaving the window. An exponential moving average applies a multiplier of 2 divided by the period plus one, moving a fixed fraction of the way towards each new close, so it responds faster and only to recent data. On a 20-period setting the EMA moves 9.52 per cent of the distance to each new close.

What to remember

The EMA multiplier is 2 / (N + 1). On a 20-period setting that is 9.52 per cent of the gap between the line and the new close.
An SMA can turn on a quiet day purely because a large value dropped out of the back of its window.
Shorter is faster and more often wrong, longer is steadier and later. There is no length that avoids the trade-off.
The EMA pair crosses more often than the SMA pair on the same data, which is a cost in a range and an advantage at the start of a trend.

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The one line of arithmetic that separates them

A simple moving average adds the closing prices of the last N periods and divides by N. Every close in the window carries identical weight, and the close that falls out of the back of the window carries none at all. An exponential moving average never drops anything. It takes yesterday's EMA value and moves it a fixed fraction of the way towards the newest close, so the most recent bar has the largest influence and every older bar keeps a smaller but non-zero one.

That fraction is the entire difference. The standard multiplier is 2 / (N + 1). For a 20-period EMA that is 2 divided by 21, or 0.0952. Each new close drags the line 9.52 per cent of the way from where it was to where price now is. A 20-period SMA has no such rule. It swaps one number for another inside the average, so how far it travels depends on the gap between the close arriving and the close leaving, and the one leaving is 20 bars back where you are no longer looking.

A 40-pip move, measured on both lines

Put both lines on EUR/USD at 1.0850 and let one hourly candle close 40 pips higher at 1.0890.

The EMA is a single subtraction and a multiplication. New value equals 1.0850 plus 0.0952 times 0.0040, which is 1.08538. The line has moved 3.8 pips, and you can calculate that before the candle closes because the only unknown is the close itself.

The SMA depends on a price you cannot see on the current screen. If the close dropping out of the window was also 1.0850, the average moves by 0.0040 divided by 20, which is 2 pips. If the departing close was 1.0820, the average moves by 0.0070 divided by 20, which is 3.5 pips. Same new candle, different line movement, because the SMA is reacting as much to what happened 20 hours ago as to what just happened.

That is the practical consequence of equal weighting. An SMA can turn on a day when nothing notable occurred, purely because a large old value rolled off the back. An EMA cannot: it only ever responds to the newest close.

Which length for which job

Length	Typical use	Cost of using it
9 to 21	Intraday trend bias, dynamic pullback reference	Crosses constantly in a range
50	Swing trend on a 4-hour or daily chart	Confirms a turn several sessions late
200	The long-term regime label most desks quote	Says nothing at all about this week

The choice is not about accuracy. A shorter average is more responsive and more often wrong. A longer average is steadier and later. You are picking where to sit on that trade-off, and the honest way to pick is by how long you intend to hold a position, not by which number appears most often in a forum thread.

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What the choice costs when the market goes quiet

The difference between the two types is invisible in a trend and expensive in a range, and the reason is the weighting. Put a 9 and a 21 of each type on EUR/USD through a quiet fortnight. The EMA pair, which reacts to every close at 20 per cent and 9.1 per cent of the gap respectively, tracks each small swing and crosses on most of them. The SMA pair only moves when the arriving close differs from the one leaving, so in a market that keeps returning to the same prices those two numbers are often close together and the lines barely separate.

The practical result is that the faster type hands you more signals in exactly the conditions where signals are worth least. That is not an argument for the SMA. In the trend that follows, the same responsiveness has the EMA pair crossing several bars earlier, and those bars are the cheapest part of the move.

So the choice is really a choice about which error you would rather make. Take the EMA if you would rather be early and wrong occasionally than late and right. Take the SMA if a quiet week costing you a string of small losses is the thing you find hardest to sit through. Neither answer is available from a backtest, because it depends on which of the two you will actually keep applying after a bad run.

This is also why a moving average is nearly always used as context rather than as a trigger. Price above a rising average is a bullish backdrop. That is a statement about the environment, not an instruction to buy at that moment.

What the average cannot see

It has no idea where the levels are. A 50-period EMA at 1.0900 does not know that 1.0900 has capped four rallies this month.
It lags by construction. Both types are computed from prices that have already printed, so they confirm a change in direction after it has begun.
It does not distinguish a trend from a drift. A slowly rising average can describe a genuine trend or a range with a mild upward tilt.
The length that worked last quarter is not a law. The 20-period average is popular because it is round, not because 20 is special.

Pick the length from your holding time, not the forum

Start by writing down how long a typical position stays open. If it is four to six hours, a 200-period average on a 5-minute chart is describing something you will never hold long enough to benefit from. Match the average to the horizon, then pick one type and stay with it, because switching between SMA and EMA after a bad run means you are now measuring your results against two different rules.

Then use the line for what it is good at. Trend direction and a reference for pullbacks, with the entry itself coming from structure or a level, and the stop placed where the idea is wrong rather than a fixed distance from the line. The wider approach to combining a trend filter with an entry rule is set out in the strategies guide, and the case for defining the loss before the entry is in risk management.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Moving Averages: SMA Vs EMA: questions

Is an EMA better than an SMA?

Neither is better in general. An EMA reacts sooner to new information, which helps in a trend and hurts in a range because it produces more false turns. An SMA is smoother and slower, which filters noise but confirms a change later. The right choice follows from how long you hold positions, not from which one performed better in a recent sample.

What are the most common moving average periods?

The 20, 50 and 200 period settings are the most widely quoted, with 9 and 21 common on intraday charts. These numbers are conventions rather than optimal values, and part of their usefulness is simply that a large number of participants watch the same lines. Any nearby period would behave almost identically.

Why does a moving average fail in a sideways market?

A moving average is an average of past prices, so in a range it settles near the middle of that range. Price then crosses it repeatedly without any sustained move developing, and a crossover system generates a signal on each pass. The indicator is working exactly as designed. The conditions are simply ones in which its output carries no information.

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