Moving Averages: What They Smooth Out and What They Hide
A practical look at simple vs. exponential moving averages and their common uses.
A simple moving average (SMA) weights all periods equally, while an exponential moving average (EMA) weights recent periods more heavily, making it more responsive to recent price action.
Moving average crossovers (e.g., a shorter MA crossing above a longer MA) are widely used as trend signals, but they are lagging indicators by construction — they confirm a trend after it has already begun.
Because they smooth price data, moving averages can also mask short-term volatility that matters for risk management, so they're typically used alongside other tools rather than in isolation.
This guide is general education for informational purposes only and does not constitute personalized investment advice from Veridian.