In the previous article, we’ve learned Simple Moving Average and Weighted Moving Average In this article, we’ll learn Exponential Moving Average.
Introduction to Exponential Moving Average
As already mentioned, various moving averages smooth out price data and facilitate the possibility of identifying trends, which is especially important in volatile markets.
In order to reduce the lag using moving averages, technical analysts often use the Exponential Moving Average- EMA). The exponential moving average reduces the lag, giving more weight to the last prices compared to more distant prices. This allows you to respond much more quickly to the current price changes compared with the simple moving average.
The weight given to the last price depends on the period of the moving average. The shorter the period of the Exponential Moving Average, the more weight will be given to the last price. For example, the 10-period beginning of the Exponential Moving Average gives the weight…
