Exponential Moving Average (EMA) indicator Guide
The EMA is a technical MT4 indicator that eliminates the disadvantages of setting equal importance on all price changes. Despite being one of the moving average indicators, the MT5 EMA indicator strategy considers the latest prices changes much more quickly than the other MAs. In fact, by dint of his adaptability in Forex markets, as well as the CFD markets, the EMA can be preferable over other tendency indicators. However, the EMA indicator for Tradingview is used mostly by crypto day traders in order to follow the price movement over specific timeframes.
Exponential Moving Average FAQ
What is ema indicator ?
The Exponential Moving Average strategy, also known as the EMA strategy, stands as an objective trend following system. He is a type of moving average that puts significance on the most relevant data points. Exponential Moving Average (EMA) is identical to Simple Moving Average (SMA). Both of them try to estimate trend direction over a given period. However, while the SMA simply computes an average of price data, The Exponential Moving Average strategy gives more weight to information that is more recent. Due to his unique calculation, it seems clear that the EMA is too sensitive to price movement.
EMA’s are developed to spot price trends over specific timeframes, such as 50 or 200 days. On the one hand, this indicator can help us to identify trends earlier than the Simple MA would. On the other hand, the EMA will probably experience more short-term changes than a corresponding SMA.
Ema indicator formula
Compting the EMA involves applying a multiplier to the simple moving average (SMA):
Weighted multiplier (k) = 2/(selected period+1)
The weighting given to the most relevant price is more significant for a shorter-term EMA than for a longer-term EMA. In other words, the more the selected period is short, the more the weighting is important. So when it comes to calculating the EMA :
EMA = Price (t) x K + EMA (y) x (1-K)
Where; t: today / y: yesterday
We can find the ema as a default indicator in the Metatrader platform or Trandingview.
How to trade with EMA indicator ?
The EMA indicator for MT5 is used to identify trend direction. Depending on the EMA line movement, Forex traders will interpret the possible price direction. In that case, trading ema means open buy order when this forex indicator is rising and the price is dipping near it or just below it. On the other side, we should consider a sell order when the indicator line is falling and the price is rallying towards it or just above it.
In other words, if the EMA is pointing up, then we should look for an upward movement. Conversely, if the MT4 indicator is pointing down, we should expect a downtrend. The exponential moving average is often the favorite MA indicator for day traders who wants to execute their trade swiftly.
As one of the MT4 moving average indicators, the EMA can also indicate possible support and resistance area in the Forex market. So a support zone can be detected while the EMA is increasing. whereas, a dropping EMA tends to define resistance. Thus, based on that EMA strategy, seeing the price near to the rising EMA (act as a support) will confirm a long position. On the other side, a short position should be taken when we notice the price near the falling EMA (act as a resistance).
In fact, crypto and CFD traders mostly use in setting an EMA timeframe the 50-, 100- and 200-day periods for the long-term line. The typical short-term timeframes used by traders are the 12-day and 26-day EMAs. Actually, trading ema can be useful in many ways. So let’s explain some examples in which we will use the Metatrader platform.
Trading ema to identify the market direction
As the image below shows, the indicator forms higher highs and it’s heading upward. So we should open a buy order as we predict a future up movement.
Trading ema to determine support areas
We notice that when the crypto price chart intercepts with the EMA MT5 indicator from above, the line operates as a support area.
Trading ema to determine resistance areas
Remarking that if the crypto price chart touches the line from below, it will display that the MT4 EMA indicator acts as a potential resistance area.
Download EMA indicator for MT4
EMA indicator for MT4 in multiple forms in order to deliver some useful clues in Metatrader 4. For instance, Forex traders mostly rely on the ribbons strategy to spot turning points. In fact, those connected EMA’s can give an idea about the upcoming price movement. So, remarking parallel EMA lines indicates a strong future trend, otherwise, we will be into two different situations: If the ribbons expand we will expect an end of the current trend. If the ribbons contract then it is a possible start of a new trend. This Ema indicator strategy seems to be adequate for medium-term traders.
Moving average exponential Ribbon
Download EMA indicator for MT5
EMA indicator for MT5 can predict the trend direction and help in spotting buy or sell signals by employing two EMA with different timeframes. Depending on this EMA indicator strategy will provide a precise prediction for Crypto traders. So we will catch a buy signal when the short-term EMA moves above the long-term EMA and a sell signal when the short-term line moves below the long-term EMA line. Day traders use this strategy frequently aiming to make a profit from every market movement.
Using two EMA indicators with different timeframes
Download EMA indicator for Tradingview
Ema indicator for Tradingview generates clues about the future asset movement relying on the weighting given to the most relevant price. In fact, CFD traders can use a long-term EMA to identify the general trend of an asset in the Forex market. If the price crosses the long-term EMA Tradingview indicator, like a 200-day line then we should estimate a potential reversal.
CFD traders should predict a downtrend if the price cross under the Tradingview indicator. Otherwise, an upcoming uptrend is willing to happen if the price goes over the indicator line.
EMA indicator with a long timeframe
Conclusion
Briefly, the Tradingview EMA indicator can be applied in a different practical manner. Other than identifying the potential crypto market direction, this MT5 indicator can spot supporting and resisting areas. Also, he can forecast upcoming reversals by relying on more than one EMA within the strategy with various timeframes. Nevertheless, the MT4 EMA indicator is exposed to whipsaw because of its capacity to quickly adjust to price changes. That is why the probability of providing incorrect signals can be sometimes high.