Updated: Apr 24
EXPONENTIAL MOVING AVERAGE
Hello traders, today I will explain you about one of the best indicators (EMA) which is used by many of the traders for both long and short term trades.
Q) What is EMA?
Ans) It is type of Moving Average (MA). But it is more accurate than moving average, it is only a line that is drawn either above or below with candle. It is a calculation of many candles with time and predict what will be move in the market either bullish or bearish.
Q) What setting to be change in MACD so that it is easier to read?
Ans) I prefer Trading View for chart analysis so I will tell according to that.
First open EMA from indicator search and click on its setting, there you will find length. There will be written 9 in front of length change it according to your need but the best is 20,50 or 200 which I use during trading. Below I will explain what is the use of 20,50 or 200 length.
Q) What is actually 20,50 or 200 lengths in EMA?
Ans) 20 Length means it is the average calculation of 50 previous candles.
50 Length means it is the average calculation of 50 previous candles.
200 Length means it is the average calculation of 200 previous candles.
Q) How to read EMA lines?
Ans) You will see a blue line on the chart. First change its length to 20,50 or 200.
On changing its length to 20 you will see that the blue line is close to candles. On changing its length to 50 you will see that the blue line is little away from the candles. On changing its length to 200 you will see that the blue line is far away from the candles. When the candle makes support or base on the blue line It indicates that the market will be bullish and will go up. And if the candle make resistance or could not go above the blue line or make support below the blue line then it indicates that the market is bearish and will go down.
Q) During which time frame should we use MACD?
Ans) For day trading (in nifty and bank nifty) or intraday use 5 minutes and 15 minutes for length 20 and 50 respectively. For swing trading use 1 day for length 200. Avoid using this indicator in 1 minute’s time frame because it is not so accurate.
Q) When to wait even if the EMA given the signal to buy or to sell the stock?
Ans) Usually day traders buy or sell the stock when the candle is just above or below the blue line or red line and suffered losses. So before buying the stock when the candle is above the blue line or red line see the candle should come above the blue line or red line and make base or support on blue or red line then after that another candle should come above the candle which has make base on blue or red line. Then wait and see if three candles are green. 1st candle should make base on blue or red line 2nd candle above the previous candle and 3rd candle above the 2nd candle if all 3 these candles are green then you can enter. Same applied to the candle which has made resistance or support below the blue or red line. Wait for the 1st candle which has made support below the blue or red line. Then see 2nd candle which should be below the 1st candle and then 3rd candle which should be below the 2nd candle. All the candles should be red. All the three candles either red or green should have a big coloured part and a small wick. Avoid entering the market if one of the three candles has a big wick and very less green or red coloured part and should wait for further confirmation.
Q) Sometimes there is a false Indication in EMA so how to make it more accurate?
Ans) But sometimes there is a false movement in EMA so do not only use it as the only indicator for the stock price. I suggest you to use the indicator Pivot Points and Supertrend with EMA. By using this it will save you from false indication of EMA.
I WILL POST MY NEXT BLOG AGAIN ON EMA [HOW TO MASTER IT AND USE IT AS A PRO TRADER]
I WILL ALSO POST THE BLOGS ON PIVOT POINTS, SUPERTREND AND OTHER INDICATORS
It is only for educational purpose which I have studied and test in the market. Any decision you take during the market is your own responsibility.