The trading guide for using the Exponential Moving Average (EMA) on the Olymp Trade platform
The moving average is created by calculating an average of closing prices from a given number of candles. There are a few methods of calculating an average. The Simple Moving Average is just a sum of closing prices divided by a number of given candles. The Exponential Moving Average, on the other hand, is more sophisticated. It also uses a given number of candles (it is EMA period) but the mathematic equation for its calculation is quite different. Well, I do not want to bother you with the formula of calculations. What is important is the fact that the EMA reacts faster on the current market movements. You can observe this by setting up both, the SMA and the EMA with the same period on your chart. Just to compare the two of them.
Setting up the EMA indicator at Olymp Trade
Once you are logged in, you choose the asset and set the Japanese candlesticks chart. Then find the indicators feature and click on it. You will see the EMA between “Trend indicators”. Select it and it will be added to your chart.
You can easily change the indicator’s parameters by clicking on the pen icon. Change the period for a higher than 10, to get a more accurate line. You can also modify the colour and the width of the indicator.
When you want to use two EMAs on one chart, you simply repeat the procedure presented above. Remember to change the colour of the second EMA so it will be easy to distinguish them.
Using the EMA14 and the EMA28 in trading at Olymp Trade
Trading with two EMAs is to observe the space between the lines and the points of intersection.
Look at the chart above. The EMA14 is moving below the EMA28 and the gap between them widens. Also, the prices are under both indicators. This means a strong downtrend and a signal to open a sell trade. As the space between the lines shrinks, the trend is close to the exhaustion.
In the opposite case, when the EMA14 crosses and starts to move above the EMA28, the gap widens and the indicators stay below the prices, we have a strong uptrend. You ought to open a buy position.
You can notice in the example above, that there are times when the indicators run close to each other and stay on the price level. This happens when the market is ranging and it is best to lay low for a time until the trend begins to grow.
Using the EMA30 in trading at Olymp Trade
The EMA with the period of 30 is also widely used in trading. With its help, you are able to identify the upcoming trend. Look at the exemplary chart above.
Of course, the most important thing is when to enter the trade. Well, when you see the EMA30 is nearing the prices from the above and finally, it cuts the candle, you get your point. Here it was a bullish candle and the EMA began to move under the prices so your position should be a long one.
Check out the next chart.
We have the opposite situation here. The EMA30 was moving below the prices, which means that it was the uptrend, but it came to the exhaustion and the indicator cut the bullish candle. Then it runs over the prices. Now is the right moment to place a sell order.
It is really very simple, yet efficient to trade with the EMA. You are able to identify the trend just by observing the relation of the indicator’s line to the price level. Moreover, when the EMA crosses the candles you will know, the trend reversal is occurring.
I just want to remind you it is a good idea to use the EMA with a period higher than 10. This will strengthen its accuracy and make it useful for long timeframe trading.
Thank you for staying with me to the end. I am aware of the fact, that practice is the best teacher, so go to your Olymp Trade demo account and set the EMA indicators. Try both approaches and decide which one works better for you. I would be glad to hear from you. Write your thoughts in the comments section below.
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