It is the price daily chart presented differently. It won’t indicate the future trend direction.Īny indicator value derives from the price. Note that no moving average, like Simple Moving Averages and Exponential Moving Averages, will make the process of taking trading decisions simpler. And see exponential moving average vs simple moving average. Well, that will do for theory let us move on to practice. How Does Exponential Moving Average Indicator Works If you employ the Weighted Moving Average, I recommend considering the trading counter-trend, something like a return to the average trading strategy.
It will provide a wrong idea and send quite many false trading signals. Why? It is too focused on the most recent prices, so the indicator will always be very close to the current exchange rates. So, it is not a good idea to see the price crossing WMA as a confirmation for the trend reversal. With this regard, it is similar to the SMA but it is focused on the present moment. The price for each previous period will have lesser value. Its calculation formula considers, first of all, the current price. The stock exponential moving average shows where the price is moving at the moment. The farther the current price is from the SMA, the stronger it will tend to approach it. The SMA, in this case, is a kind of a core around which the price is fluctuating. The current indicator value is the average price for a particular period.įor example, if the set period is 8, the current value will indicate the average for the last 8 periods. Let us compare the simple moving average vs exponential moving average. Otherwise, the indicator will change its direction only when the price movement is stronger or /and longer. If the current price has more weight, the indicator will faster react to the new information and look more like a zigzag. The current indicator value already includes the current price action, the previous price action, and the importance coefficient. Let us explore what is an exponential moving average in more detail. The pleasant look is important in the Forex market, isn’t it? What is the exponential moving average? The EMA indicator moving average is somehow more popular than other MA modifications. Exponential Moving Average Indicator (EMA) In the calculations, it has either a greater or lesser value compared to the past data.Įach of these moving averages is used in technical analysis as a trend indicator. Types of Moving AveragesĪll hundreds of thousands of MA versions differ only in relation to the current price.
The exponential moving average (EMA) is a moving average analyzing the current price changes and indicating the most recent price moves. For example, in the last 8 hours, in the last 5 days, etc.Ī simple MA wasn’t sufficient for traders, so they invented millions of Moving Average versions that could react to the price changes as fast as possible.
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