Moving average is one of the most widespread indicators. Despite its simplicity, it is fairly effective and is applied by traders as one of the trend’s indicators. When we consider moving averages, we imply the value of the price for the certain period that is formed according to the pre-agreed rules. There are different varieties of this indicator, including the smoothed moving average.
Moving averages are rarely used in practice. Majority of traders prefers not to use this type of moving average for their analysis. And it is not because this indicator is very bad, but because it has the specific plotting. The smoothed moving averages are plotted giving attention to the long intervals for an analysis. In this regard, the line’s oscillations are insignificant. In fact, what we are trying to say is that this variety of moving average is less sensitive to the market’s noise. Therefore, it sends the lesser amount of false signals.
It is attained at the expense of the fact that for the change of indicator line’s position in the market, a strong movement has to occur, and this movement has to provide such conditions. One would think that the less sensitive to noise indicator has to be applied in the technical analysis more often. But this is not true. Given a fact that this chart is being crossed with a great difficulty, the market’s analysis is difficult too. Thus, a number of trading signals almost vanishes.
The professional traders use SMMA mainly for the long-term trade, and they use charts with longer timeframe for an analysis. It allows saying that this indicator suits for buying of options with the long expiration time the best. And the day trading using smoothed moving average is fairly difficult.