TRADACITY

Exponential Moving Average reduces the lag by applying more weight to recent prices relative to older prices. The weighting applied to the most recent prices depends on the specified period of the moving average. The important thing is that the exponential moving average puts more weight on recent prices. As such, it will react quicker to recent price changes than a simple moving average.

 

Usage:

 

It smoothens a data series and makes it easier to spot trends, some thing that is especially helpful in volatile markets. Moving averages are lagging indicators, and therefore, by definition, will give late signals. By weighting recent price data more heavily, exponential moving averages attempt to speed up the signal given. It provides support and resistance.