EMA Indicator MT4 …Determining the market trend can be the difference between trading at a loss or smiling to the bank. Nowadays, traders now leverage moving average (trend indicators) to help them determine the price direction of the market. Moving average also helps to determine possible price reversal and flat market.
In view of the above, this article will x-ray the prospect of a specific moving average known as EMA (exponential moving average) and also highlight the attributes of EMA Indicator MT4. So, sit back and relax while we walk you through this important tool whose features traders in the know are exploring to make money.
What Is Moving Average?
Moving average is a special tool dedicated for assessing market trends and is used to smoothen data variations. It achieves this by reflecting back at a recent number of data points and calculating the average values of those numbers. While there are several moving averages, the average values can be calculated in more than one way. The most straightforward way is the use of Simple Moving Average (SMA).
SMA considers the entire price value equally and adopts the mean as its average. On the other hand, other moving average assign specific values to different price values. This way, recent prices are more favored than older prices.
The explanation above detailed the working model of Exponential Moving Average. Let’s now take a look at EMA and its calculation.
What Is EMA?
To be honest, defining EMA is a bit difficult without delving into its mathematics. But before we get our hands dirty trying to figure out the mathematical side of it, let’s take a look at the broad definition of EMA.
An EMA is a smoothing technique which involves the addition of a portion of the previous moving market and a portion of the current price. Does this make sense to you? If it doesn’t, we believe the mathematics side will be much clearer.
Mathematical Calculation Of An EMA
The formula for calculating EMA at time “t” is EMAt = α x current price + (1- α) x EMAt-1. From the formula, EMAt-1 is used to represent EMA of the previous period, while ‘α’ is known as the smoothing constant; it has a value between 0 and 1. As you can now see, EMA calculation involves prior calculations. And as seen from the representation the time ‘t’ is as per the choice of the trader, thus EMA indicator MT4 helps to analyse data in accordance to the trader’s market strategy.
Choosing The Right EMA Period
Truth be told; no EMA period will generate up to 100% profit regardless of your trading strategies. Most traders use the EMA period as it suits them. For instance, intraday traders prefer shorter EMA periods, while swing traders love to adopt extended EMA periods. EMA indicator in MT4 being a useful tool trade irrespective of trader’s stategy.
Popular EMA periods for intraday traders are EMA 5, 9, 15, 21, while EMA 50, 100, 150, and 200 are popular for swing traders. The image below shows a forex chart where the application of EMA Indicator in MT4 can be seen.
Installing EMA Indicator In MT4
In this section, we will walk you through the step-by-step process of installing EMA in MT4. Before we start, it is important to mention that EMA Indicator is one of the major tool bundled together with the MT4 package.
Step-by-step Installation Process
Open the MT4 terminal and immediately click on the “insert” icon. Select indicators, then trend, and then moving averages.
The image below shows this first step:
Once you click on the MA (moving averages), you will see a pop-up box and under it, choose EMA and click “OK”.
The chart below shows how EMA Indicator was plotted on a forex pair – USD/JPY
Conclusion EMA Indicator MT4
There you have it! EMA is one of the oldest technical indicators on the market. It is quite popular among new and expert traders. It is very sensitive to the movements of price. Like we mentioned earlier, there is no secret period that would generate 100% profit in the forex market, but in the end, it is your skills, money management acumen, and mindset that would influence your money making ability.
At this point, we believe you now understand the concept of Exponential moving average and how to install EMA indicator in MT4. Kindly use the comment box below to share your experience with us on how EMA and your trading strategies have enabled you to make money. Improve your trading with one off the Best Metatrader Indicators.