Basically, the moving averages such as the Simple Moving Average (SMA) and Linearly Weighted Moving Average(LWMA) are a set of numbers, each of which is the average of the corresponding subset of a larger set of data points. The averages are easy to understand and can be used “as is” by the beginners of forex.
This operations produce an effect of smoothing of the original price movements and supress the market noise. The result often shows the actual trend which can be extrapolated (extended). A moving average such as the LWMA may also use unequal weights for each data value in the subset to emphasize particular values in the subset.
Often the statistician's judgment is used to select appropriate factors. However, the most sophisticated and probably the most popular among the forex forcasting moving averages is the exponentially smoothed moving average (EMA) which applies weighting factors decreasing exponentially.
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