How to Set Up and Use the EMA Indicator to Day Trade

As a beginner day trader, you will have to familiarize yourself with multiple studies and indicators as you begin your trading journey. One of the first indicators that I learned about personally what the exponential moving average, or the EMA Indicator. The EMA is a great reference for identifying current direction and potential reversals.

Let’s go more in depth on what exactly the EMA Indicator is, how to set it up, and use it effectively to day trade.


Exponential Moving Average:

The exponential moving average is an indicator that visually looks like on line on a stock chart and places a great emphasis on recent data points. Its primary purpose is to indicate buy and sell signals based on crossovers and divergences from historical averages. The EMA is a faster version of the simple moving average, or SMA.


How I use the EMA to day trade:

For day trading, I reference the EMA when I am looking for a confirmation of an overall direction.

If the security seems to be uptrending (making higher highs and higher lows) and the SMA is pointing upwards, I would then look at the EMA to see which direction it is pointing.

This gives me a good idea of what direction the stock may be heading in the short term, since it focuses more heavily on recent price points.

In the chart below, I made the EMA bold so that you can see it more clearly:

In this chart, you can see that when the EMA is pointing upward, the stock tends to have upward momentum as well. Also, when the EMA is pointing downward, the stocks direction tends to be downwards as well.

The EMA is not the only indicator that I use the reference direction, however, it is a valuable tool that every new trader should be familiar with.


How to set up the EMA in TD Ameritrade ThinkorSwim:

In order to begin using the EMA in ThinkorSwim the process is actually really simple.

First, open the platform and click on “Edit Studies and Strategies”:

This button that you click on while look like a miniature beaker in the top right on your screen.

Next, use the search function to search “MovAvgExponential”

And then add it to your studies.

For study setting, I have mine as the following:


Hopefully this article has provided some value to you!

If you want to learn more about getting started investing/trading in the stock market, I recommend you read this article:

The Most Basic Concept Every Stock Trader Should Know

and here’s the book that led me to begin investing in the stock market in the first place. I highly recommend!

Financial Freedom: A Proven Path to All the Money You Will Ever Need


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