By assigning a greater weight to newer prices, the EMA line sits closer to the price action than does the simple moving average (SMA). This is because EMA may exclude past prices, which no longer have an impact. Exponential moving average exampleĮMA reduces the effect of the noise by cutting the time lag of the data. You should remember to modify the EMA set-up when you trade new instruments because there isn’t a one-size-fits-all structure when it comes to an EMA indicator. The typical short-term time frames used by traders are the 12-day and 26-day EMAs. When it comes to an exponential moving average strategy, the most common periods used by traders in setting an EMA time frame are 50-, 100- and 200-day periods for the long-term line. How to read the exponential moving average Using EMA as part of your trading strategy is not limited to one specific instrument, and you can set up an EMA line for a variety of trading instruments. This means the exponential moving average indicator can react much faster to changes in the price of an asset. It therefore gives importance to the most recent behaviour of traders. Disadvantages of exponential moving averageĮxponential moving average (EMA) is a technical indicator that differs from other moving averages in that its calculations give greater weighting to the most recent price data.Advantages of exponential moving average.How to use the exponential moving average.How to read the exponential moving average.
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