Calculation
An N-close SMA equally averages those prices. An EMA updates the prior average with the new close using alpha = 2/(N+1). Initialization and available history can cause small platform differences.
Response and lag
EMA weights recent prices more heavily and usually responds faster than an equal-period SMA. Both use observed information, not the next price. A crossover may arrive after much of a move has occurred.
Market context
Check slope, price distance and trend versus range. Crossovers can alternate without continuation in a range. Include levels, volatility and costs; switching averages after every loss does not validate an improvement.
Illustrative example
For N=20, alpha is 2/21. A prior EMA of 98 and a new close of 100 yield about 98.1905. Calculating SMA requires all twenty closes and the observation leaving the window, not just those two numbers.
Review checklist
- Compare identical periods and price inputs.
- Use sufficient initialization history.
- Identify trend or range.
- Distinguish crossover from an entry decision.