Mov Avg Exponential

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Mov Avg - Exponential

The Mov Avg - Exponential was developed in an effort to give more importance to more recent price changes

The calculation is a two step process.

First the exponent must be calculated based on the number of periods selected by the user. Then the exponent is applied to the current interval's close (or other data type selected by the user), and added to the previous interval's moving average multiplied by (1-exponent).

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User Settings

Up to 20 individual exponential moving average lines can be displayed. All of their parameters are controlled from the Mov Avg - Exponential Properties dialog box.

The user can alter two inputs (Period and Data Field) as well as control the visual display of each line from this dialog box.

Period for Averaging

The user can set the number of previous intervals that will be averaged with the current interval to produce the EMA for a given interval.

Type in a whole number in the Periods text box in the Parameters tab of the Mov Avg - Weighted Properties dialog box.

Data Field

Most traders prefer to calculate the EMA using the Close data field. This is the default setting. However it is possible to choose other data fields from the drop-down list, the choices include: Open, High, Low, Close, Bid, Ask, Volume and Open Interest.

Display

The exponential moving average plot is a line superimposed over the price chart.

The exact display of the plot is controlled from within the table in the Parameters tabbed page of the Mov Avg - Weighted Properties dialog box.

Up to 20 weighted moving average lines can be displayed at a time. To display a line, check its checkbox, un-check the box to hide the line. Any changes to a hidden line's display will be saved.

The Style selected for the line plot can be one of the following: Solid, Dashes, Dots, and Points.

Once the style is selected, each lines Color and Weighting are also controlled from this page. The color selected for each line will be indicated in the chart's label in the top left corner:

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The Scale's display is controlled from the Scale Settings and Scale Appearance tabbed pages.

Comparison with Simple Moving Average

An exponential moving average will more quickly respond to price changes than a simple moving average will:

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In this example, the Exponential moving average line (purple) responds more rapidly to the reversals in the price chart and has less "lag" even though it uses the same 10 intervals of close prices as the Simple moving line (blue) does.

Other Methods of Altering Bias

Two other indicators can be used to reduce noise or change the bias in favor of more recent data.

Displaced Moving Average

Short period moving averages can sometimes be plotted so close to the price chart that numerous false signals are generated. The easiest way remove this noise is to move the plot of the simple moving average a few intervals forward, this will delay signals from the indicator and remove noise.

For long time periods, the moving average plotted for a particular interval is actually lagging because it is composed of past data. By moving the plot backward half the number of periods on which the average is calculated, the plot can be "centered" over the current interval and be more statistically correct.

The displaced moving average (Mov Avg - Displaced) indicator has a setting to accomplish both of these objectives.

Exponential Moving Average

Another indicator that alters the calculation itself, similar to the weighting calculation of the Mov Avg - Weighted, is the weighted moving averages (Mov Avg - Weighted).

The following chart compares both exponential and weighted moving averages with the simple moving average:

movavwgtdvexplins.gif

The Simple moving average (blue dotted line) gives equal weight to all data from its 20 interval calculation period.

The Weighted (yellow line) and Exponential (purple line) each use a different calculation to give greater importance to more recent data. For this reason both lines more closely track the current price chart, but the each method of calculation causes them to be slightly different.

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