When you first get into investing, it may be in the most casual way possible; you may have been gifted some stock from your grandparents when you were born (who was born in 1986 and wouldn’t have liked 10,000 shares of Microsoft when it was trading down around a dime and peaked out around $53 in 2000?), through their companies 401K program, or in some other innocuous way. Still there comes a point in your investing career that you need to beef up your knowledge so that you can be the best investor you can be. So it goes for the Exponential Moving Average. The Exponential Moving Average is the best way for you to tell what is going on with your investments over time and how the information is trending right this very moment. While your average investor may shun this type of information; saying they’re not a “numbers investor” the simple fact is that getting your head around basic terms like the Exponential Moving Average can be all the difference between your making a killing in the market or simply getting on the ride and watching your stocks value rise and fall; getting seasick all the while.

** What is Exponential Moving Average:** The Exponential Moving Average; also known as the “exponentially weighted moving average,” is a term used in charting movements of your investment. On a stocks chart they have what is known as the simple moving average; according to Investopedia.com the Exponential Moving Average is very similar to the simple moving average; the only difference being that in the Exponential Moving Average, far more importance is thrust upon the latest data.

** How Can the Exponential Moving Average Be Interpreted:** The simplest ways are often the best; many average investors would ask why they needed to know something like the Exponential Moving Average in lieu of the far more easy to interpret simple moving averages. The Exponential Moving Average is a chart which is going to react faster to recent movements in price.

** How is the Exponential Moving Average Read:** When looking at something like the Exponential Moving Average, investors are looking for indicators which indicate up or down trends. The Exponential Moving Average is able to create indicators such as the Moving Average Convergence Divergence (MACD) or the Percentage Price Oscillator (PPO). On a shorter-term chart, 12 and 26 days are two of the most important Exponential Moving Averages and the 50 and 200 day Exponential Moving Averages are longer-term trends.

** Exponential Moving Average: Conclusion:** Most investors just want to know if they made or lost money. However before you get yourself swept up in some hype, buy at the peak and then get left holding a bogus stock which is valued at far less than you purchased it for, it is a good idea to know your stocks current value, historical value, and things like it’s Exponential Moving Average. While you may occasionally miss the boat on a “sure thing” you can count your blessings in all the money you didn’t lose by jumping too quickly into a stock whose Exponential Moving Average you did not know whose value has since plummeted.

Source:

http://www.investopedia.com/terms/e/ema.asp