What’s an EMA indicator?
The Exponential Moving Average (EMA) indicator is a moving average indicator. Moving average indicators are basically trend-following indicators that smoothen out price action by filtering out short-term fluctuations, thus creating a line that follows trends.
For many traders on the Binomo platform, the EMA indicator is better than the Simple Moving Average (SMA) indicator. That’s because EMA places more weight on recent or even current data rather than old data. SMA simply calculates the average, which is less helpful if you’re hoping to use this indicator in real-time. In other words, EMA gives more weight the more recent the data is, while SMA gives weight to all data equally.
How to set up the EMA indicator on Binomo?
The first step would be to log into your Binomo account.
Once you’re already on the trading platform, click on the indicator button on the left side of the screen to see your chart preferences.
Under chart preferences, you can see two choices: ‘Indicators’ and ‘Tools’. Click on ‘Moving Averages’ under the Indicators tab.
You can see several choices like Field, Offset, Period, Type. Field means the price or the combination of prices that will be used as the base for average calculations. Period shows the number of bars that will be used in the calculations. Type means the type of moving average indicator you prefer, which in this case is ‘Exponential’. You can leave the Offset as it is, which is 0.
Adjusting the moving average settings
Leave the Field as ‘Close’ but for the Period change the number to something greater than 10 for a more accurate EMA. I used 14 and 28 for this example. Change the Type to ‘Exponential’ and click ‘Apply’ to save your settings. You’ll instantly see a colored trend line appear on your chart.
In this example, we’ll be using a close-field, 14-period EMA alongside a close-field 28-period EMA. Make sure to repeat the steps twice in order to come out with two lines. Also, choose two different colors so that you can distinguish the two. Don’t forget to click ‘Apply’ when you’re done!
How to trade on Binomo using EMA14 and EMA28
As you can see in my example above, I’m trading using the EMA14 and the EMA28 as my indicators. My objective, in this case, would be to determine where these two lines will cross each other. I’m also interested in knowing the distance between them as they track the prices.
Do you see the part where the EMA28 is under the EMA14? You may notice that at one point the distance between the two lines is rather wide. Something like this means that there’s a strong uptrend going on because the prices are above both these two indicators. This is a great time to enter a buy position. Once the gap starts narrowing, it means that the uptrend is starting to become exhausted.
On the other hand, when you see the EMA28 crossing over the EMA14, that signals a strong downtrend. The prices are below both indicators, making it a great time to enter a sell position.
If the indicators are running through the prices, that means the markets are ranging. Unless you’re feeling extra brave today, you should probably just sit and wait for a clearer trend to develop before entering any position.
How to trade on Binomo using the EMA30
One of the most commonly-used EMA indicators is the 30-period EMA. Most of the time, this EMA indicator is used to identify trends that are still developing.
If you’re unsure how exactly this can be used on a developing trend, just check the screenshot below, which is simply a continuation of the above screenshot. On the chart, you can see the EMA30 cuts into one bearish candle just as the trend starts reversing.
Since the market has already started going bearish, you can see that the EMA30 indicator is now running above the prices rather than below them. When this happens, it’s a pretty good signal to enter a buy position.
Again, the reverse is true. When you see the EMA30 indicator running below the prices, it’s a signal that you should probably enter a sell position.
As you can see, the EMA indicator is a very simple indicator that you can use to identify developing trends and trend reversals. Just by looking at the EMA line, you can instantly tell the condition of the market, whether it’s up or down, whether it’s a strong trend or not, and whether the trend is going to reverse soon or not.
One additional tip before I go: remember what I said about EMA being more accurate if you set the period to a number above 10? That means EMA indicators are much better for trading longer time frames.
Now you know how to use the EMA indicator to trade on Binomo! Make sure to try out your newfound knowledge by signing up for a free practice account now.
Good luck on your trading journey with Binomo!