Exponential Moving Averages

The exponential moving average also known as the exponential smoothing. This indicator is the one preferred by technical analysts of the various different moving averages, as it is a balance between the simple moving average, that lags and the weighted moving average that is over sensitive.

The simple moving average gives more weight to the current prices. Therefore it’s advantage is that it is quicker and follows the prices better. The disadvantage is that it ism more prone to whipsaw than the simple moving average.

From the chart you can see the difference between the simple moving average and the exponential moving average.

As you can see the Exponential moving average follows the FTSE 100 closer. The SMA (Simple Moving Average) is less sensitive to price movement.

Now I will show you a spread betting strategy of two moving average cross and how the two different  averages react.

You can see above how the exponential moving average crosses earlier than the simple moving average. giving you an earlier short spread betting signal. But it also gives you an earlier signal to close out your trade.

when deciding which spread betting strategy to use. You must decide which moving average will fit your style of trading. You could also mix the two. using an EMA to enter and a SMA to exit.

Next:Weighted Moving average