Ask Colin

To use a moving average to buy troughs in a trend, should an investor use a simple or an exponential moving average?

Personally, I don't think it matters. Agonising over it is much less important than the problem of what period to use for the moving average. That is hard enough to get right.

Dr Alexander Elder makes an eloquent case for using an exponential moving average in his books Trading for a Living and Come into my Trading Room. I tend to agree with him in theory. However, in practice it often makes little difference. If you held a gun to my head and made me choose, I would pick exponential, but if I only had simple moving averages available, it would not worry me.