Why are the names EMA and SMA, or moving averages, different?
Both are averages of prices. They differ in how much weight they place on recent prices.
Table of contents
Remember this first
First, 3 things to remember
- 1SMA gives equal weight to each price.
- 2EMA gives greater weight to recent prices.
- 3The crossing of lines does not determine the next price.
There is an average that reflects recent prices more heavily.
SMA is a Simple Moving Average. If you add 10, 10, 10, 10, and 15 dollars and divide by 5, it is 11 dollars. EMA is an Exponential Moving Average, a method that gives greater weight to recent prices.
EMA calculations incorporate previously calculated averages. It is fine to learn the formula later. First, remember that it is a moving average line that reacts more sensitively to recent changes.
When two lines meet, it is called a crossover.
When a short-term moving average rises above a long-term moving average, it is called a golden cross; when it falls below, it is called a dead cross. When describing the order of multiple moving averages, the terms bullish alignment and bearish alignment are also used.
Even if the name sounds impressive, it is just the relationship between lines calculated from past prices. 1-minute candles with 20 periods and daily candles with 20 periods contain different timeframes, and the crossover may disappear in candles that have not yet closed.
If it moves sideways, the lines will cross multiple times.
When a stock price fluctuates within a similar price range, it is called consolidation. In such cases, the two moving averages may meet repeatedly. A major rise or fall does not necessarily begin every time they cross.
At first, look at which average it is, how many candles are used, and the actual direction of the stock price together. A line that reacts faster is not always more accurate.
You should not make such assumptions
“Since a golden cross has occurred, it will definitely rise, right?”
The crossing of moving averages is a result calculated from past prices. They may cross repeatedly during fluctuations.
Check what you have read.
- Have you checked the periods of the two lines?
- Is it a crossover that occurred on a completed candle?
- Have you also seen cases where they crossed repeatedly while fluctuating?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- Exponential Moving AverageNew window
Fidelity Investments · Verify 2026-10-20
An average that assigns greater weight to recent prices. - MACDNew window
Fidelity Investments · Verify 2026-10-20
Default settings for 12/26/9 and repeated crossovers during consolidation.
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.