How Indicators are calculated?

**PCMNewsdesk** · 10-01-2014, 07:49 AM

Dear members
Hi,

Here we are going to introduce and talk about how some the most useful indicators are calculated and may be discuss about how they are being used in trading.
Please be with us

Be healthy & wealthy
News Desk

**PCMNewsdesk** · 10-01-2014, 07:57 AM

EMA - Exponential Moving Average

Exponetial Moving Average (EMA for short) is one of the most used indicators in technical analysis today. But how do you calculate it for yourself, using a paper and a pen or – preferred – a spreadsheet program of your choice. Let’s find out in this explanation of EMA calculation.

Calculating Exponential Moving Average (EMA) is of course done automatically by most trading and technical analysis software out there today.

Here is how to calculate it manually which also adds to the understanding on how it works.

In this example we shall calculate EMA for a the price of a stock. We want a 22 day EMA which is a common enough time frame for a long EMA.

The formula for calculating EMA is as follows:

EMA = Price(t) * k + EMA(y) * (1 – k)
t = today, y = yesterday, N = number of days in EMA, k = 2/(N+1)

Use the following steps to calculate a 22 day EMA:

1) Start by calculating k for the given time frame. 2 / (22 + 1) = 0,0869

2) Add the closing prices for the first 22 days together and divide them by 22.

3) You’re now ready to start getting the first EMA day by taking the following day’s (day 23) closing price multiplied by k, then multiply the previous day’s moving average by (1-k) and add the two.

4) Do step 3 over and over for each day that follows to get the full range of EMA.

This can of course be put into Excel or some other spreadsheet software to make the process of calculating EMA semi-automatic.

Goodluck

**profit** · 10-06-2014, 09:49 AM

Originally Posted by PCMNewsdesk

EMA - Exponential Moving Average

Exponetial Moving Average (EMA for short) is one of the most used indicators in technical analysis today. But how do you calculate it for yourself, using a paper and a pen or – preferred – a spreadsheet program of your choice. Let’s find out in this explanation of EMA calculation.

Calculating Exponential Moving Average (EMA) is of course done automatically by most trading and technical analysis software out there today.

Here is how to calculate it manually which also adds to the understanding on how it works.

In this example we shall calculate EMA for a the price of a stock. We want a 22 day EMA which is a common enough time frame for a long EMA.

The formula for calculating EMA is as follows:

Use the following steps to calculate a 22 day EMA:

1) Start by calculating k for the given time frame. 2 / (22 + 1) = 0,0869

2) Add the closing prices for the first 22 days together and divide them by 22.

3) You’re now ready to start getting the first EMA day by taking the following day’s (day 23) closing price multiplied by k, then multiply the previous day’s moving average by (1-k) and add the two.

4) Do step 3 over and over for each day that follows to get the full range of EMA.

This can of course be put into Excel or some other spreadsheet software to make the process of calculating EMA semi-automatic.

Goodluck

What about other indicators. Though everything can be found in the wikipedia I would like to get easier and clearer explanation here. Now I trade with MACD and bollinger bands with my broker. Can you explain their origination and ground principles they work on?

**Danielpeters** · 05-20-2019, 05:06 AM

Indicators. Indicators are composed of multiple data elements, and typically consist of a numerator and denominator. Calculated totals do not have a denominator. Indicators are used to calculate coverage rates, incidence and other values are a result of data element values that have been entered into the system.

**Quiinhome** · 04-21-2020, 11:35 AM

Hi,
First of all thanks for sharing this valuable knowledge.
I am new on forex trading. I want to know more about forex.

""2) Add the closing prices for the first 22 days together and divide them by 22.

3) You’re now ready to start getting the first EMA day by taking the following day’s (day 23) closing price multiplied by k, then multiply the previous day’s moving average by (1-k) and add the two""

Actually i understand step 1. But in step two you said devided them by 22, this term i don't understand. And what is the full definition of (k).
Could you please tell me?

Thank you..

**Sameeh** · 05-25-2020, 03:55 PM

These are good knowledge and help us to know more about the indicators because they are important for trading for many traders that use the indicators in their trading strategies and some traders use it beside another ways of trading to get more confirmation, i like moving average and bollinger bands and stochastic as they are good for trading and give good signals and so this can help for making of successful trading and making of some money, the indicators are required for analysis of the chart and can help for reading of the chart better and so the trader can take more accurate decisions and can be able to find better chances of trading always and so he will be able to succeed and make consistent profits.

**Quiinhome** · 06-15-2020, 04:13 PM

How i calculate my profit perfectly. Does any body know?
Please tell me.

**FXOpen Trader** · 01-19-2021, 08:50 AM

Originally Posted by Quiinhome

How i calculate my profit perfectly. Does any body know?
Please tell me.

You will need to make use of the PIPs Calculator

**maby81** · 07-30-2021, 11:38 PM

Thanks for sharing however it would be nice to add some more indicators as there are several others such as tick volume, Volume-Weighted Average Price, On-Balance-Volume, and Money Flow Index, Moving Averages, EMA, RSI.