### Exponential Moving Average - EMA Definition

Exponential Moving Average (EMA) Explained. Day 5: The simple moving average would be calculated as follows: ( + + + + ) / 5 = The result of the simple moving average would be a lot lower and it would give you the notion that the price was actually going down, when in reality, Author: tartangosa.tk, tartangosa.tk Aug 23, · A moving average can be a very effective indicator. Many traders use exponential moving averages, an effective type of moving average indicator, to trade in a variety of markets. An exponential moving average strategy, or EMA strategy, is /5(49). The Double Exponential Moving Average (DEMA) is a technical indicator similar to a traditional moving average, except the lag is greatly reduced. Reduced lag is preferred by some short-term traders.

### Moving Averages: EMA, SMA and WMA | Forex Indicators Guide

Anyone who has ever used price charts to trade stocks and forex pairs will probably have come across moving averages at some point because these are some of the most popular technical indicators that are available, **exponential moving average forex indicator**, and have many different uses. However while many people may know about SMAs and EMAs, for example, they may not necessarily know what they actually mean, and which one they should be using, so let me address the first point straight away: EMA stands for Exponential Moving Average SMA stands for Simple Moving Average Simple Moving Average If you plot a simple moving average SMA on your price chart, it will show the average of the most recent closing prices of the period of your choice.

So on a daily chart, for example, a period SMA will indicate the average price based on the previous 20 days, and is therefore a good indicator of the short-term trend, while a day simple moving average will show the average price of the previous days, and is obviously a much clearer indicator of the long-term trend.

You can instantly see if a stock or forex pair is trending upwards or downwards over time, and if the short-term and long-term moving averages are moving upwards or downwards at the same time, you know if you have a really strong trend in place. Exponential Moving Average The exponential moving average EMA is similar to the simple moving average, except that it places more weight on the most recent prices.

Therefore it could be argued that it provides a much more useful indication of the current price trend because it is more closely aligned to the latest price movements.

However I would say that the best and most popular settings are 5 and 20 for the *exponential moving average forex indicator* trends, and 50, and for the medium and long-term trends. The 5 and period EMAs are arguably more suitable for traders, while the period EMA is more suitable for long-term traders and investors.

A 5, 10 or period EMA will indicate the direction of the short-term trend, while a or period EMA will give you a good idea of the underlying long-term trend, as mentioned above. Broadly speaking, the strongest trends will tend to **exponential moving average forex indicator** short, medium and long-term EMAs moving in the same direction at the same time although the short-term EMAs will always be more volatile.

EMA *Exponential moving average forex indicator* This indicator can also be used to get you into a profitable trade because when a short-term EMA crosses through a longer-term EMA, it is a good indication of a change in trend, and is therefore a good time to enter a new position.

I myself have always found it profitable to enter long or short positions on the major forex pairs when the EMA 5 crosses the EMA 20 on the 4-hour chart, but if you like to trade stocks, for example, you might find it profitable to enter a long position when the EMA 50 crosses upwards through the EMA on the daily chart, for instance.

EMA Breakouts Another profitable way you can use the exponential moving average indicator is to use a combination of different settings, such as 5, 20, 50 andfor example, *exponential moving average forex indicator*, wait until they are all closely bunched together, and then trade the subsequent breakout.

The EMA 5 will move upwards or downwards first, followed by the EMA 20and once a new breakout starts to take shape, **exponential moving average forex indicator**, you will find that you can often make some big gains if you enter a position fairly early.

Exit Point It is not always easy to determine where you should take profits, but an exponential moving average can provide you with a natural exit point, particularly the EMA and EMA This is because when you enter a trade against the trend, anticipating a reversal, the price will often be a long way above or below the EMA at that point, but will inevitably move towards this EMA at some point in the future, where you can then take profits.

Final Thoughts The exponential moving average is one of those indicators that everyone can potentially benefit from. You just need to know that this particular moving average is superior to the simple moving average SMA because it places more importance on the latest prices, and should, therefore, be a lot more useful when trading stocks, **exponential moving average forex indicator** pairs or any other markets.

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### Use EMA in Your Forex Trading Strategy

Aug 23, · A moving average can be a very effective indicator. Many traders use exponential moving averages, an effective type of moving average indicator, to trade in a variety of markets. An exponential moving average strategy, or EMA strategy, is /5(49). The Double Exponential Moving Average (DEMA) is a technical indicator similar to a traditional moving average, except the lag is greatly reduced. Reduced lag is preferred by some short-term traders. Moving Average is a trend indicator. Besides its obvious simple function a Moving Average has much more to tell: In Forex moving average is used to determine: 1. Price direction - up, down or sideways. 2. Price location - trading bias: above Moving average - buy, below Moving average - sell. 3.