What does it measure?
Moving averages smooth a window of prices. SMA gives observations equal weight; EMA places more weight on recent observations.
How to read it
Observe price position, average slope and crosses between different lengths. Being above an average does not guarantee the next price increase.
SMA = (P₁ + … + Pₙ) / nHypothetical calculation
Closes of 10, 12, 11, 13 and 14 give a five-period SMA of 12. A new close of 15 replaces the oldest value, 10, and the SMA becomes 13.
Before using it
Longer lengths generally smooth more but respond later. Sideways prices can cross averages repeatedly. Changing SMA to EMA changes the comparison.
Check on your chart
Keep the symbol and timeframe fixed and record your settings. Compare an updating bar with a closed bar. This exercise is not a trade recommendation.
Is EMA always better than SMA?
No. With length 5, the common EMA weight is 2/(5+1)=1/3. If the previous EMA is assumed to be 12 and the new close is 15, the next EMA is 12+(15−12)/3=13. That previous value is a separate example assumption. Faster weighting can respond to both a lasting move and temporary noise. Keep the price source and timeframe fixed when comparing.