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# <center>PART 1(Theory)</center>
# <center>Define in your own words what are simple moving averages and exponential moving averages.</center>
One of the core indicators in technical analysis is the **moving average**. They are used in defining both potential support levels and resistance levels.
The average is plotted on the chart bar by bar, which forms a line that moves along the chart as the average value changes and this bring about the word **moving**.
# <center>Simple moving average</center>
A **simple moving average (SMA)** is used for calculating the average of a selected range of prices, which is usually closing prices, by the number of periods in that particular or the specified range.
Simply put, It is the ***average price*** over a specified period.
**SMA** is a technical indicator used in technical analysis which helps in determining a trend if it is a **bullish trend** or **bearish trend**. If the calculated SMA is up this depict that the trend is **up** and if it down it depict that the trend is **down**.
# <center>Exponential moving average</center>
**Exponential moving average** is also a technical indicator used in technical analysis. It is more like the SMA though they have differences in their calculation. **EMA** tends to follows the price movement much faster, and this bring about operator’s preference to using this average.
**EMA** also brings about adequate up-to-date information on the movement of the price, which has a consequence on the Line that is drawn on the graphs. The line which is updated in a more optimal way, shows us which direction the price could take according to how it is inclined.
Also, **EMA** helps in the consideration of entry and exit point.
# <center>Explain how simple and exponential moving averages are calculated.</center>
# <center>SMA Calculation</center>
To calculate the **SMA** of 20 days, all the prices for each day within that 20 days will be added together and the result will now be divided by 20 which is the total number of days.
**SMA** = ***(p1+p2+p3+p4+ ...+pn)/n***
Where **p1**,**p2**,**p3** represent price of each day respectively and **n** represent the no of days.
# <center>EMA Calculation</center>
**SMA** will be the **initial value** for the first EMA calculation. for example, if one want to calculate a 50 days EMA, one will have to start by calculating the SMA.
Below are the procedures to calculating EMA for 5 days.
* To get the SMA, we make use of the SMA formula e.g
First five closing price are ***24, 23, 24, 22 and 23***
**SMA** = (24 + 23 + 24 + 22 + 23 )/5
=**23.2**
So the **initial** EMA value is 23.2.
* To get the smoothing constant, we make use of the formula below
**Smoothing constant** = 2/(1+no of days)
So using our previous data, we have our smoothing constant to be
2/(1+5) = 0.3333
The recent data are emphasized by the smoothing constant which only depends on the EMA time period.
Having gotten the previous EMA value and smoothing constant we can go ahead and use the EMA formula
**EMA** = (closing price - previous day's EMA) × smoothing constant + previous day's EMA
**EMA** = (22 - 23.2) × 0.3333 + 23.2
= **22.80**
So the **EMA value** for day six is 22.80.
Let us say the closing value on day seven was 21, you'd repeat the process, using day six's EMA value of 22.80 as the new previous day's EMA which will bring about the following calculation
**EMA** = (21 - 22.8) × 0.3333 + 22.8
= **22.20**
# <center>Briefly describe at least 2 ways to use them in our trading operations.</center>
***Death cross*** pattern is one of the ways moving averages are used in trading operations. **Death cross** occurs when a short term e.g 20 days SMA **crosses below** the long term e.g 50 days SMA and this gives bearish signal, that is further losses are in store or that there is a market downward turn
**Golden cross** pattern is another way of which moving averages are used in trading operations. **Golden cross** occurs when a short term SMA breaks above a long term SMA. As a result of high trading volumes and this gives bullish signal, that is further gains are in store or that there is a market upward turn
# <center>What is the difference between simple moving averages and exponential moving averages (Explain in Detail)</center>
The main difference between a simple moving average (SMA) and the exponential moving average (EMA) is that in the **EMA calculation**, most recent data is graded or weighted to have more impact and this makes EMAs quicker than SMAs to give up-to-date trends. Comparing long term averages brings about obvious differences.
EMA gives a higher weighting to recent prices, while all values have equal weighting in SMA.
EMA is more sensitive or reactive to recent price changes and the one other reason why it is preferred to SMA
Exponential moving averages are more of a timely indicator of a price trend than SMA.
Price trend are easily seen on SMA.
# <center>Define and explain in your own words what "Fibonacci Retracements" are and what their gold ratios are?</center>
**Fibonacci Retracements** forms both the support and resistance zones which helps in price corrections.
**Fibonacci Retracements** could be for an ***Uptrend*** or ***Downtrend.***
*Fibonacci Retracements** are gotten from the mathematical relationships between numbers in the Fibonacci’s sequence.
Future corrections are calculated or measured using **Fibonacci Retracements.**
***0,1,1,2,3,5,8,13,21, . . .*** are the Fibonacci sequences. After the first 2 digit(0 and 1)other number are the sum of the two preceding number.
The high and low point on a chart and by marking the main ratios horizontally which produces a grid depict the **Fibonacci retracements** and this lines helps to map or identify feasible price reversal points.
Using the Fibonacci sequences we can get the following golden ratio.
23.6%, 38.2%, 61.6%
The golden Fibonacci ratio of **61.8%** is gotten by dividing a no in the sequence by the number that comes after it.
The golden Fibonacci ratio of **38.2%** is gotten by dividing a no in the sequence by the number that comes two places after it.
The golden Fibonacci ratio of **23.6%** is gotten by dividing a no in the sequence by the number that comes three places after it.
# <center>PART 2(Practical)</center>
# <center>Show the step by step of how to add a "Simple and Exponential Moving Average" to the graph (Only your own screenshots - Nothing taken from the Web).</center>
Below is the procedures to adding SMA or EMA to a chart.
***Go to https://www.tradingview.com/***
***Click on charts***
***Click on Indicator & Strategies symbol(fx) as shown in the screenshot below***
***Input either simple or exponential in the search box and click on it in the dropdown box***
***Click on the settings symbol to edit and click on OK after editing***
# <center>Use "Fibonacci Retracements" to chart a bullish and bearish move (Own screenshots only - Nothing taken from the web).</center>
<center>***Bearish move***</center>
<center>***Bullish move***</center>
***CONCLUSION***
This is a great session as it widens my understanding on technical indicator in general. Thanks to @lenonmc21 for imparting this rewarding skill.
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