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Strategies & Market Trends : Technical Analysis - Beginners
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To: TA2K who wrote (8755)10/6/1998 3:06:00 PM
From: David R. Evans  Read Replies (2) of 12039
 
Hello Nicholas,

It's totally up to you...... The best way to decide which one you like better is to put them both on a few charts and see which ones fit your style....... The only person that can answer your questions is YOU..... Most times I use Exponential because it gives more weight to recent price moves...

MSWIN Exponential MA:

An exponential (or exponentially weighted) moving average is calculated by applying a percentage of today's closing price to yesterday's moving average value.
For example, to calculate a 9% exponential moving average of IBM: First, we would take today's closing price and multiply it by 9%. We would then add this product to the value of yesterday's moving average multiplied by 91% (100% - 9% = 91%).

Because most investors feel more comfortable working with time periods rather than with percentages, MetaStock Pro converts days into an exponential percentage. For example, if a 21-day exponential moving average is requested, a 9% moving average is calculated.

The formula for converting days to exponential percentages is as follows:

For example, to calculate a 10-day exponential moving average, you would use 0.18:

To convert an exponential percentage into time periods, you would use the following formula:

Using our previous example, we can check to see that a 0.18 exponential moving average is actually a 10-day average.

The method used to calculate an exponential moving average puts more weight toward recent data and less weight toward past data than does the simple moving average method. This method is often called exponentially weighted.
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