(Closing price-EMA(previous day)) x multiplier + EMA(previous day) Why Professional Traders Prefer Using the Exponential Moving Average? (2 / (Time periods + 1) ) = (2 / (10 + 1) ) = 0.1818 (18.18%)Īfter calculating the SMA and weighting multiplier values, you can easily calculate the EMA with the following calculation: EMA Formula You should always remember that the number of periods will have a profound impact on the weighting multiplier.Īs we are using 10 days in this exponential moving average example, the weighting multiplier would be calculated as follows:
The weighting multiplier is calculated with the following formula:ĮMA(current) = ( (Price(current) – EMA(prev) ) x Multiplier) + EMA(prev) Next, we need to figure out the weighting multiplier for the number of periods we want to calculate for the EMA. If we want to calculate the SMA of the last 10 days, we simply sum up the values of the last 10 closing prices and divide by 10. SMAįirst, we need to figure out the simple moving average. You need to go through three steps to calculate the exponential moving average for trading any instrument.
How to Calculate the Exponential Moving Average?
Although most modern charting packages automatically calculate the EMA for you, let’s still review the formula to help increase your understanding. The EMA uses this very notion that traders should pay more attention to the most recent price action. Would you agree that analyzing last week’s price action will offer a better understanding of market behaving today? Would you also agree that today’s price action will likely better dictate tomorrow’s price action? Let’s say you are trading the daily chart and looking at last month’s price action. However, under the hood, there are key differences in terms of how they are calculated. If you look at a chart with a simple moving average (SMA) and an exponential moving average, you won’t be able to differentiate between the two at first glance. Where Exponential Moving Average Trading Strategies Can Let You Down.#4 – Using an Exponential Moving Average as a Stop for Breakouts.#3 – Exponential Moving Average Example of Dynamic Support and Resistance.#2 – Generating a Sell Signal while Trading.5 Exponential Moving Average Trading Strategies.Trading with the Exponential Moving Average.Why Professional Traders Prefer Using the Exponential Moving Average?.How to Calculate the Exponential Moving Average?.What is the Exponential Moving Average?.