Exponential Moving Average – What is an Exponential Moving Average?

What is an Exponential Moving Average?

Definition of Exponential Moving Average: This is also sometimes referred as EMA. It is a form of arithmetical moving average which is as same as a simple average. The exponential moving average may be referred as an exponentially biased average. The moving averages are regularly used in the technical analysis to highlight the potential or direction for bringing alteration in the money trend. The arithmetical computations smoothens the cost and fluctuations of the noise or volume like a misinterpretation by the Forex trader are lessened. A moving average reacts in a quick manner to the latest price alterations. The popular temporary averages offered by Exponential moving average are 12 and 26. These are significant components used for creating indicators like Percentage Price Oscillator and Moving Convergence Divergence. They are regularly used by combining the Relative Index which in turn confirms the time of the Forex trend. Generally, an upward momentum is established when a temporary average exceeds a long term average. A downward momentum takes place when a temporary average exceeds the permanent and long term average.