Moving averages are the most popular tool for smoothing price action and identifying the trend. The two most commonly used averages are the simple moving average (SMA) and the exponential moving average (EMA), which is a specific type of weighted moving average that emphasizes the most recent price data with the goal of creating a more responsive indicator.

Here, we look at a lesser-known way to smooth price data — the double exponential moving average (DEMA), which uses two calculations involving the EMA to reduce lag (the tendency for moving averages to trail price action).