The Best Moving Average for Intraday Trading

The most popular and the best moving averages for intraday trading are simple moving averages, and exponential moving averages.

To analyse the facts, the analytics selects the latest data and eliminates the previous data in calculating the moving average. 

Methodology to Calculate the SMA/EMA

The parameters used for the calculation of moving averages is the closing stock prices. It is the price at which the stock holds when the stock market rings the closing bell.

Seldom, the parametric values are changed to high, low and open price in calculating the moving averages. 

Fundamentally the Simple Moving Average & the Exponential Moving Average Differ: 

Both SMA, and EMV are used to identify the stock trends, directions of stock flows, and make potential buying/selling stocks. 

Exponential Moving Averages, EMA, gives more precise results to Simple Moving Averages as the calculations provide more weight-age to the latest price date. 

EMA is calculated by giving  higher weighting to recent prices, and the SMA is calculated by providing equal weighting to all values.

In addition, EMA enables analysts to speculate the future trends.  

Simple Moving Average Crossover Strategy:

The crossover strategy helps you in identifying the entering and closing trades. 

You can identify a bullish trend when the 50 day SMV crosses above the longer 200 day SMV.

You can identify a bearish trend when the 200daySMV crosses above the 50SMV. 

If you use the less day SMA that would draw closer to the current price movements.  

The candlestick pattern of 10 day SMA (in orange) and 20 day SMA (in green) depicts different patterns. 

When the 10-day SMA crossover the 20-day SMA, it is ideal for you to buy the shares.

When the 10-day SMA crosses below the 20-day SMA, it is ideal for you to sell the shares.   

Best Exponential Moving Average Crossover Strategy, EMA:

 In exponential crossover strategy, you will have to combine two exponential moving averages, also known as Smoothing. 

Ideal Example: 

An ideal example is the combination of a 50 day EMA with a 100 day EMA. The 50 day EMA is the faster moving average and the 100 day EMA is the slower moving average. 

While calculating the EMA, you will find that the 50 day EMA will include a lesser number of data and hence the resultant value will lie in and around the current market price and hence it reacts quickly. 

When calculating the EMA you will see that the 100 day EMA will possess more data and the calculated average will have a price nowhere to the current market price. You will find the reactions pretty slow. 

CIPLA ( 1-day) chart, when the 25 day EMA line representing in pink crosses below the 50 day EMA line that represents black colour, an atmosphere to sell the stocks stands an opportunity. 

Likewise, when the 25 day EMA line crosses above the 50 day EMA then a climate of buying opportunity gets created. 

You can find a bullish crossover when 25 Day EMA crosses above the 50 Day EMA. 

Likewise, a bearish crossover develops when the 50 day EMA crosses above the 25 day EMA.