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12.05.2019

AAKASHAYA PATRA SEVEN STAR SMART EDUCATION SERIES PART – 8 :

Exponential Moving Average
"Exponential Moving Average" As we know that moving average is play very important role in Technical Analysis and its a time tested and trusted indicator. Moving Average is a legging indicator.

The main difference between Simple Moving Average and Exponential Moving Average is, Simple Moving Average gives a equal weight to all closing price while Exponential Moving Average gives a more weight on recent closing price, it means Exponential Moving Average gives an early signal or alerts as compair to Simple Moving Average as it mainly focus on recent change happen in stock closing price.

Calculation of EMA :
EMA = Price(t)×k+EMA ( y)×(1-k)
Where:
t=today
y=yesterday
N=number of days in EMA
k=2÷(N+1)

EMA is a time tested and trusted indicators to forecast the trend and the future price movement of any stock, commodity and currency If EMA value is increasing day by day or in any specific time frame and if the stock price close above the EMA line, its a good signal for Trend Reversal and its sign for upward side movement in that specific stock,and if EMA value is decreasing day by day or in specific time frame so it’s a negative sign indicate bearish atmosphere will may start for this specific stock and if stock price close below EMA line its a clear-cut negative sign for that stock that stock price may go down for this stock in next coming days
Once again I repeat here that moving average is Legging Indicators and it follow the trend, it gives signal when trend has been completely changed

Use of EMA as a Support and Resistance :-

 When we apply EMA for any candlestick chart, below part of EMA line will be act as resistance and upper part of EMA line will be act as a support Stock price will face Support and Resistance accordingly, if price show a breakout it means when stock price close above EMA line (Break the Resistance) and we get confirmation candle also above EMA line it means it’s a change of current down trend and there will be a trend change in this particular stock as it manage to close above EMA value On other side if any stock show break out down side of the EMA line (Break the Support), it will be consider as a bearish sign for that particular
stock and price will may fall down in coming days for this stock

Importance of EMA Crossover :-

 EMA Crossover will play a very important role to forecast Up Ward side and Down Side momentum In stock market, some people are doing trading or investment with emotions and because of that they missed in time entry and in time exit If we think this scenario with 50 Days (Fast and Short Term) and 200 days (Slow and Long Term) Moving Average Crossover If 50 days EMA cross 200 days exponential moving average from below, in Technical Analysis its known as Positive Crossover and its a Bullish
Breakout, Stock Price may get appreciate in coming days from this crossover price and from other side if 50 days EMA cross 200 days EMA from above side it is known as Negative crossover in Technical Analysis, its a sign of bearish breakout and stock price may fall down in coming days from this crossover price So EMA Crossover is helpful for those who trade or invest with emotions,
it give a sign for timely entry and exist to trader and investors

According to Time Period some widely use Exponential Moving Average and Crossover:-

10 to 20 For Short Term Period
50 For Medium Term Period
200 For Long Term Period

Crossover :-

5 and 21 For Short Term Period
20 and 50 For Medium Term Period
50 and 200 For Long Term Period

for more such type of education joint our online series and batches and be a pro trader contact on 7028 421 786.

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