What is Exponential Moving Average?

[Shing1985]

This type of Moving Average and Market Direction like Simple Moving Average but the difference is that Exponential Moving Average takes the most recent period price from the pre-comparative period price more seriously. Let's make it clearer.

Suppose you find the 5-day simple moving average, first-day closing price - 1.218,
second-day closing price - 1.2341,
third-day closing price - 1.2398,
fourth Day Closing Price - 1.2364,
Day
5 Closing Price - 1.2305 Then if you divide the 5-day closing price by 5, the simple moving average will come out.

 

[Electric Rainbow]

Traders use the Exponential Moving Average (EMA) overlay on their trading charts to define entry and exit points of a trade based on where the price action sits on the EMA.

 

[radex78]

Maybe EMA is better than SMA, but it will depend with each trader,
EMA indicator may be smoother than SMA, but both are the same lagging indicator

 

[Electric Rainbow]

Exponential Moving Average (EMA) is similar to Simple Moving Average (SMA), measuring trend direction over a period of time. However, whereas SMA simply calculates an average of price data, EMA applies more weight to data that is more current. Because of its unique calculation, EMA will follow prices more closely than a corresponding SMA.

 

[Electric Rainbow]

Maybe EMA is better than SMA, but it will depend with each trader,
EMA indicator may be smoother than SMA, but both are the same lagging indicator

Yes indeed but while trading one should refer both before concluding.

 

[radex78]

Yes indeed but while trading one should refer both before concluding.

Yes I think it good trading rules, but also need to have a risk management plan
because all indicator has own imperfection, choose pair with low spread

 

[sunar14]

This type of Moving Average and Market Direction like Simple Moving Average but the difference is that Exponential Moving Average takes the most recent period price from the pre-comparative period price more seriously. Let's make it clearer.

Suppose you find the 5-day simple moving average, first-day closing price - 1.218,
second-day closing price - 1.2341,
third-day closing price - 1.2398,
fourth Day Closing Price - 1.2364,
Day
5 Closing Price - 1.2305 Then if you divide the 5-day closing price by 5, the simple moving average will come out.

I guess EMA is a kind of advanced tool compared to SMA because there is additional layer of flexibility, you can spot fine trends earlier than when you do it with SMA

 

[Electric Rainbow]

The EMA or exponential moving average is considered to be a technical chart indicator that would be tracking the price of an investment over time. The EMA is a type of weighted moving average or WMA that provides more weighting or importance to current price data.

 

[RainbowRain]

EMA can also act as a dynamic support or resistance level. The price can bounce off the EMA, which provides opportunities to enter a trade. But do not forget that the EMA lags behind the actual price movement, as it is based on past data.

 

[Elijah_0]

The Exponential Moving Average (EMA) gives more weight to recent prices compared to the Simple Moving Average (SMA). For a 5-day SMA, sum the closing prices (1.218, 1.2341, 1.2398, 1.2364, 1.2305) and divide by 5. This method smooths price data, aiding trend analysis.