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ChartCoder

Multi Timeframe EMA - TradingView Indicator

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What Is an Exponential Moving Average (EMA)?
The exponential moving average (EMA) is a type of moving average that considers the weighted average of a series of recent data to reflect the ongoing trend in the market. The weight of the EMA is exponentially tilted towards more recent occurrences, giving the recent data greater influence over the reading.

This price-based indicator typically looks at the average closing price of a security over a specified number of periods, and smoothing out short-term price fluctuations to provide a clearer image of the market trend.

The EMA is a popular technical indicator among traders, as it can be applied to all financial markets, including stocks, crypto, forex and commodities. It is often used alongside other technical analysis tools and indicators that can be found in our store to provide optimal results.

How to use the EMA indicator
In our EMA indicator, there are 2 sets of EMAs at which one is your current timeframe EMA, and another is the next higher timeframe EMA as shown below:

Current Timeframe : Higher Timeframe
Minutely or hourly : Daily
Daily : Weekly
Weekly : Monthly

  1. Identifies and confirms the market trend
    If a financial security asset is within an uptrend, the current timeframe EMA (cEMA) will be above the higher timeframe EMA (hEMA). For a bearish trend, the current timeframe EMA (cEMA) should remain below the higher timeframe EMA (hEMA).
  2. Act as support and resistance bands
    Besides indicating trend direction, EMA works as both a dynamic support and resistance level. When a trader is using an exponential moving average indicator within their strategy, they may choose to buy when the price dips near, or just below, the EMA line (support level). On the other hand, when the EMA is falling, traders may choose to sell when the price is rallying towards, or just above the EMA (resistance level).
  3. Crossover of EMA - Trend reversal point
    A current timeframe EMA (cEMA) is used to reflect the current impetus of the market while a higher timeframe EMA (hEMA) shows the broader trend of the market. When a cEMA crosses over from underneath a hEMA, this serves as a bullish signal in the market and is commonly known as a golden cross. Conversely, the crossing over of an cEMA from above a hEMA is considered bearish and is recognised as a death cross. We may use the crossover setup as potential trend reversal points.

Summary
The Exponential Moving Average is a valuable tool for traders to help identify trends of a financial instrument over a period of time. By giving more weight to recent price movements rather than equal averages like the simple moving average, a trader may be able to account for a higher degree of subtlety within the price action. However, as it is based on historical data, it is not a credible source for future predictions and traders can be misled by false signals. Therefore, it should be used in conjunction with other forms of technical and fundamental analysis when building an efficient trading strategy.

  • Product Prerequisites

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