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Difference of Exponentially Weighted Averages

albertcasas  
Exponential Moving Average (EMA) Trend Analysis difference DEWA EWA
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ema trendanalysis difference dewa ewa
Implementation of Difference of Exponentially Weighted Averages in Pine Script. It can generate a line that adjust to the overall trend of a graphic. The lines that are generated in a new plot are the the Difference of Exponentially Weighted Averages (blue) and it binarization over the previous values.

Exponentially Weighted Averages

This technique is used for generating smoother lines that adjust to a graphic. In finances, it is used to predict the overall trend of a graphic. The function that defines the EWA is the one bellow:

  • Vt = β V(t-1) + (1 - β) θt

Where:

  • β: Hyper-parameter that we have to adjust.
  • V(t-1): Value calculated for the previous element of the graphic.
  • θt: Current element of the graphic.

The calculus of differences consist in subtract to each value the previous values.
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.

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