What is Exponential Moving Average?

Trading currency is not as easy as it looks and there are many things you should learn and understand so you will not make any mistake that will give you huge loss. One term you should know is EMA or known as Exponential Moving Average. Many beginners don’t understand about it but it plays the big role in the data. EMA is the Moving Average type or MA that places the great significant weight on the recent data. EMA can also be referred as weighted moving average exponentially.

What to Know About Exponential Moving Average?

EMA or known as Exponential Moving Average will react significantly to the recent data changes than the SMA or Simple Moving Average which may apply the same weight to all types of research or observation in the period time. However, the beginners don’t need to be confused and you just have to remember 3 important things about EMA such as:

• EMA is the moving average or MA which places the huge weight and also significance on the recent points of the data
• EMA is just similar to other moving average types and the technical indicator will be used to produce the sell and buy signals based on the divergences and crossover from historical average.
• The traders use many types of EMA differently in terms of the days such as 20 days, 30 days, 90 days even 200 days of the moving average

To get the result of EMA, there are 3 basic steps you need to calculate such as:

• Calculate the Simple Moving Average or SMA
• Calculate its multiplier for weighting or smoothing factor to the previous EMA
• Calculate the recent or current EMA

To calculate and get the Exponential Moving Average or EMA, you should compute and calculate the Simple Moving Average over the certain periods of time. Getting the result of SMA is not difficult at all and you just need to sum of the closing prices of the stock for the time period in question; and the result will be divided with the same number of time period.

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