Exponential Moving Average (EMA)

Question 1

What Is an Exponential Moving Average (EMA)?

Answer 1

a type of moving average (MA) that places a greater weight and significance on the most recent data points.

Question 2

Whats the difference between the EMA and SMA

Answer 2

An exponentially weighted moving average reacts more significantly to recent price changes, so sticks more tightly to the stock price than a simple moving average (SMA), which applies an equal weight to all observations in the period.

Question 3

What length EMA must the price cross to signal a reversal

Answer 3

200 day

Question 4

What should moving averages be used for and why

Answer 4

the conclusions drawn from applying a moving average to a particular market chart should be to confirm a market move or to indicate its strength.
They are lagging indicators that show trend change after optimal time has passed

Question 5

Why would you use an EMA along with an SMA

Answer 5

As EMA can provide a lot of false signals so SMA can be used to reduce this risk.

Question 6

Name 2 indicators that can be created using a 12/26 day EMA

Answer 6

Moving average convergence divergence (MACD)

Percentage Price Oscillator (PPO)