Advantages and Disadvantages of Simple Moving Average – Analysis and Forecast – December 31, 2023

Most forex traders, regardless of their trading skill level, prefer using SMA because of its simplicity and ease of understanding. Using the indicator tool involves dividing the total of data points accumulated over a period of time by the number of periods based on the current currency price.

Indicator tools also generate signals that tell traders when to enter and exit active currency trading markets. SMA calculates the opening and closing times of a currency price as well as the low and high points of the price. Most forex traders apply average lengths of 10, 20, 50, 100 and 200 to their trading charts, depending on the currency trading time frame.

Advantages and disadvantages of simple moving average

Advantages

• It is one of the most sophisticated forex trading tools that makes it easy to use even for first-time traders.
• Unlike other trading tools, it is not prone to fluctuations. Instead, fluctuations in currency prices do not affect the trading tool.
• It is one of the most reliable technical analysis tools for identifying market resistance and support points.
• It is one of the best starting trading bases for first-time forex traders.
• Trading charts help cut out short-term noise.

disadvantage

• It focuses more on past price movements without acknowledging recent changes.
• Each price taken has the same emphasis.
• It is not a practical trading tool for intraday and short-term traders.