Tuesday, 25 June 2019


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Exponential Moving Average

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The exponential moving average is an indicator that is derived from the use of SMA in an attempt to give progressively important recent contributions using a weighting system or exponential smoothing and take into account all the data series. The period is used to calculate the factor of anti-aliasing: If P is the number of days of smoothing factor 2 / (P + 1)

What is? Its main function is to smooth the data series that is calculated, allowing observe more clearly the current direction, ie trend. By your way of calculating the moving average is a follower indicator, not a leader. And has a delay of such sessions as indicating the period of calculation. Unlike the simple moving average and weighted moving average, The Exponential moving Average made his gyre before and therefore it is more sensitive to the address changes of the prices. It allows designing automated trading, buying and selling. Establish support and resistance dynamic in different time periods.

How is it used? The period for calculating the moving average is adjusted depending on the period that arises the investment. Thus for a short time the calculation period ranges from 3 to 25 days, for the medium term from 30 to 75 days, and for the long term between 100 and 200 days.  Its best feature is obtained with trending markets, helps apply maximum investment "lengthen profits and cut losses." In flat markets or without trend use is restricted by the large number of false signals   generated. It can be used as trend indicator for the term that is parsed according to its period. If prices are above the moving average will be in bullish trend, if prices are below the moving average will be in downtrend. It can be used to generate buy signals when prices cut upward the value of the moving average. It generates a sell signal when prices cut downward the value of the moving average. It can be used to determine support and resistance levels of dynamic.

Formula exponential moving average:

Suggestion of Trading: It is possible to use an automatic operation system, based an exponential moving averages of deadline 13 calculated on the closing price and two exponential moving averages of 3 sessions calculated on the maximum and minimum of the session. We will buy (open a long position) when the closing price upward crosses the moving average of the maximums and the moving average on the closure is ascending. We will close the buying position if the closing crosses down the moving average of the minimum. We will sell (open a short position) when the closing price crosses down the moving average the minimums and the moving average of the closing is descending. We will close the selling position if the closing is superior to the mobile average of the maximums.

 References the Indicator: Kaufman, P. J. The New Commodity Trading Systems and Methods. John Wiley & Sons. New York 1980

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Erick Gálvez
Author: Erick GálvezWebsite: http://www.asdforex..comEmail: This email address is being protected from spambots. You need JavaScript enabled to view it.
ASDForex manager and professional trader since 2008. I am also Aleforex.com manager where you can view the services that I give
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