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Flashcards in Exponential Moving Average (EMA) Deck (6)
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1
Q

What Is an Exponential Moving Average (EMA)?

A

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

2
Q

Whats the difference between the EMA and SMA

A

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.

3
Q

What length EMA must the price cross to signal a reversal

A

200 day

4
Q

What should moving averages be used for and why

A

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

5
Q

Why would you use an EMA along with an SMA

A

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

6
Q

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

A

Moving average convergence divergence (MACD)

Percentage Price Oscillator (PPO)