A Simple Moving Average (SMA) is the plain average of closing price over N bars. A 50-day SMA is just the average close of the last 50 days, recalculated every day. It smooths out noise to show the underlying direction, at the cost of lagging behind sudden moves.
An Exponential Moving Average (EMA) does the same job but weights recent bars more heavily, so it reacts faster to new information while still smoothing out single-bar noise. That's the tradeoff between the two: SMA is steadier and slower, EMA is quicker and slightly noisier.
Both anchor a huge share of systematic trading: trend filters ("only trade long above the 200-SMA"), crossover signals (fast MA crossing above slow MA), and warmup gates that keep a strategy from acting before it has enough real history to compute a signal from.
Educational content, not investment advice. zengtrade is paper-first and non-custodial.