Exponential moving averages

phenomenon

Junior member
23 0
Hello,
I am absolutely new to trading and would like to start to learn how indicators work. I would like to start with EMA. I found a following formula somewhere on the internet:
EMA_tod = P_tod*K + EMA_yest*(1-K), where K=2/(N+1), N=the number of days in the EMA, P_tod=today's price, EMA_yest= the EMA of yesterday. The problem for me is that I can't see anything exponential in that formula. I think, it's more weighted moving average. Shouldn't exponential moving average look somehow like this?
EMA_today = K*(p1 + (1-K)*p2 + (1-K)^2*p3 + (1-K)^3*p4 + ...), where p1 is today's price, p2 yesterday's price and so on. Here I can easily see that older data are exponentially smaller than the latest ones. Could anybody explain me how it should be? I would like to understand it, as it belongs among basic indicators. Sorry for my poor English.
 

FringFX

Active member
244 6
i am not fully familiar with the ema formula, but that looks a bit different. where did you get that formula?
 

phenomenon

Junior member
23 0
i am not fully familiar with the ema formula, but that looks a bit different. where did you get that formula?

That formula is from wikipedia, but there was a little mistake. Then I calculated it manually, corrected the mistake and the result is the file I attached. Now it should be clearly understandable how the older data are exponentially lower in value. My formula is correct for sure, I have verified it by using real data and I got the same results as I could see in my trading platform. So that is how it works. I also have to say that I was on a wrong way and don't deal with indicators any more, I only focus on price action. I don't think that indicators are important.
 

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neil

Legendary member
5,167 747
That formula is from wikipedia, but there was a little mistake. Then I calculated it manually, corrected the mistake and the result is the file I attached. Now it should be clearly understandable how the older data are exponentially lower in value. My formula is correct for sure, I have verified it by using real data and I got the same results as I could see in my trading platform. So that is how it works. I also have to say that I was on a wrong way and don't deal with indicators any more, I only focus on price action. I don't think that indicators are important.


Try a spot of Naked Trading : throw off your ema and stochs and dive straight into the pool of prices:)

Price Action and the Price Patterns they create
 
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neil

Legendary member
5,167 747
If it's less than 3 feet deep be careful of hard stops.

...and bouncing off ones' Bollingers:LOL:

Oh no !.....Thats an indicator word :eek:... Go stand in the corner Neil :(

Sorry...I was too long in the sunshine yesterday:eek:
 

phenomenon

Junior member
23 0
Fortunately, I didn't spend too much time using indicators, approximately 1 month, after that I figured out it's not the way. Neil, so you don't trade pure price action, right? :) Do you use any more indicators apart from Bollinger bands?
 

Splitlink

Legendary member
10,850 1,233
Fortunately, I didn't spend too much time using indicators, approximately 1 month, after that I figured out it's not the way. Neil, so you don't trade pure price action, right? :) Do you use any more indicators apart from Bollinger bands?

You deserve to be taken seriously. Excuse our humour. The answer is, IMO, that nothing works. As soon as one is comfortable with an indicator, there is a reversal.

An entry point is your choice and it does not matter if it is an average, Bollinger, trend line or whatever.

Neil once gave us a link to a good post on Forexfactory. It is lucky that we have met up on this thread. Remember, Neil, about keeping stops short, by Feb, was it?
 

neil

Legendary member
5,167 747
You deserve to be taken seriously. Excuse our humour. The answer is, IMO, that nothing works. As soon as one is comfortable with an indicator, there is a reversal.

An entry point is your choice and it does not matter if it is an average, Bollinger, trend line or whatever.

Neil once gave us a link to a good post on Forexfactory. It is lucky that we have met up on this thread. Remember, Neil, about keeping stops short, by Feb, was it?

This bloke?
The System III (Oh no!) - Page 95 @ Forex Factory
The poster DIM.. adds interestings views on the thread


Feb 27, 2010 11:57am
feb2865
Member Member Since Jun 2006
1,435 Posts



--------------------------------------------------------------------------------

Quote:
Originally Posted by jalp
Thank you sir. I like it that way.

What is your ticks goal and stoplost on m30.

regard's



Stop loss - a reasonable distance from the turning point based on risk management.

Tick goals - profit target - I tend to look at the latest turning point (contrary ) like for instance, if I am short, I look for the last long turning point as a possible target - or I might trail my stop to B/E - all depends on how I feel like it....Look at the charts I posted and the trade I was running...
__________________
Beginning of Febs thread:

The System III (Oh no!) @ Forex Factory
 

neil

Legendary member
5,167 747
Fortunately, I didn't spend too much time using indicators, approximately 1 month, after that I figured out it's not the way. Neil, so you don't trade pure price action, right? :) Do you use any more indicators apart from Bollinger bands?

Wrong:)

Here is a little reading list to start you off. Eventually, via trial and error plus reading around the forums you will get a feel for what suits you. Remember, this list is a little of what I think is useful. Others may disagree, add to the list or post nonsense. Good luck and come back much later if you have any questions.:)

This guy seems to favour price action:
benji533's Profile @ Forex Factory

This guy has some indicators:whistling
http://www.forexfactory.com/attachment.php?attachmentid=318875

http://www.trade2win.com/boards/forex-discussion/135906-forex-trading-approaches-3.html

That should keep you busy(y)
 
Last edited:

The Leopard

Experienced member
1,877 1,020
I don't suppose there's anything wrong with sticking an EMA on your chart if you want. You might even find it helpful. Just remember what it is and, more importantly, what it isn't.
 
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Splitlink

Legendary member
10,850 1,233
Neil. it startes off like this:-

“I give a reasonable chance to my position...”
I have some interesting questions about exits/limits… etc... rule
of 20… all that

I have it on Adobe but don't have a link to his post.
 

neil

Legendary member
5,167 747
Neil. it startes off like this:-

“I give a reasonable chance to my position...”
I have some interesting questions about exits/limits… etc... rule
of 20… all that

I have it on Adobe but don't have a link to his post.

This one ?:

“I give a reasonable chance to my position...”

www.forexfactory.com/attachment.php?attachmentid=873128&d...
 

Splitlink

Legendary member
10,850 1,233
This one ?:

“I give a reasonable chance to my position...”

www.forexfactory.com/attachment.php?attachmentid=873128&d...

(y)

Phenomenum, have a read of that.

Thanks, Neil, I have reserved a place for you at the deep end. :D
 
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