Sunday, 14 April 2019

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Exponential Moving Average (EMA)
Exponential Moving Average and the Simple Moving Average are more or less the same in measuring the trend direction over a period of time. The difference occurs where EMA accentuate more on the current prices i.e., current data and the SMA calculates only the average of price data.
Exponential Moving Average strategy
1) 15 Days Simple Moving average -SMA
2) 15 Days Exponential Moving Average- EMA
How does the Indicator Work?


The method that we assume to SMA would be the same when analyzing EMA. We need to know that the EMA focuses more on the price movement EMA would help us. It can help us to identify trends more rapidly than an SMA and at the same time when comparing an SMA, more short-term changes will be distinguished in EMA.
How and when it can be applied
In consecutively to find out the trend direction and trade in that direction EMA can be applied.
EMA rises: Traders may look at buying when prices dip near or just below the EMA.
EMA falls: Traders may look at selling when prices meet towards or just above the EMA.
Moving averages also indicate Support and Resistance areas. When there is a raise in the EMA, it supports the price action and when there is a fall in the EMA, it provides resistance to price action. The EMA and other moving averages do not help us to identify a trade at the exact bottom and top. There will be a delay at the entry & exit points even though the moving averages support us trading in the general direction of a trend. The EMA has a shorter delay compared to the SMA with the same period.


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