Description
The Exponential Moving Average (EMA) is a type of moving average that assigns greater weight to the most recent price data. Unlike the simple moving average where all data points have the same weight, the EMA's weighting factors to price data decrease exponentially.
The recursive representation of the EMA formula is the following:
EMA1 = price1;
EMA2 = α*price2 + (1 - α)*EMA1;
EMA3 = α*price3 + (1 - α)*EMA2;
EMAN = α*priceN + (1 - α)*EMAN-1;
where:
Nis the bar number;- α is a smoothing coefficient equal to
2/(length + 1).
Calculation of an N-period EMA will normally include more than N bars worth of data; in fact, these bars will normally be assigned about 86% of weight.
The main plot of the exponential moving average can also be accompanied with breakout signals: crossovers of the price plot with the average. Bullish breakouts are indicated every time the price crosses above the average. When the price falls below the average, a bearish breakout is recognized. By default, breakout signals are disabled; to enable them, set the show breakout signals parameter value to yes.
Input Parameters
| Parameter | Description |
|---|---|
price
|
The price with which the EMA is to be calculated. |
length
|
The number of bars which affect the EMA most significantly. |
displace
|
The displacement of the EMA study, in bars. Positive values signify backward displacement. |
show breakout signals
|
Controls visibility of breakout signals. |
Plots
| Plot | Description |
|---|---|
AvgExp
|
The Exponential Moving Average (EMA) plot. |
UpSignal
|
If enabled, displays an up arrow every time the price crosses above the exponential moving average. |
DownSignal
|
If enabled, displays a down arrow every time the price crosses below the exponential moving average. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.