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Simple and exponential MAs are comparable only in a very crude sense. They
actually do quite different things. Look, for example, at the expression
for determining the next term in an EMA sequence and compare it with the
expression for the next term in a simple MA. In particular, look at the
portion of each expression which defines the participation of the last price
in the raw price sequence.
For the simple MA, that portion is 1/n x Price where n is the MA span
(number of prices in the average). For the EMA the multiplier is 2/(n+2)
which, for large n, is nearly 2/n. In other words, the EMA is almost twice
as responsive as the simple MA to changes in the final price (for an EMA
with equivalent "lag"). That's why the EMA is less smooth.
Carroll Slemaker
----- Original Message -----
From: "Mark Jurik" <mark@xxxxxxxxxxxx>
To: "'Omega List'" <Omega-list@xxxxxxxxxx>
Sent: Thursday, September 28, 2000 7:44 PM
Subject: RE: Exponential moving average
> >> If there is anything in print that explains it well to a
non-mathematician, perhaps you or someone else on the List could make a
recomendation?<<
>
> The explanation is very mathematical. It depends on the different
frequency responses inherent in these two filter designs, which in turn
depend on the value of N. For details, get a book on digital filter design.
>
> Regards,
> Mark Jurik
>
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