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Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceA 10-day exponential moving average stood at RM3.00. Today's close is RM3.22. Using the standard smoothing constant of 2 ÷ (n + 1), what is the new 10-day EMA?
The smoothing constant is 2 ÷ (10 + 1) = 0.1818. New EMA = previous EMA + k × (close − previous EMA) = 3.00 + 0.1818 × 0.22 = RM3.040. RM3.022 uses k = 1 ÷ 10, the weight a simple average would give. RM3.110 is the midpoint of the old EMA and today's close (k = 0.5). RM3.220 gives today's close all the weight. Source: SIDC Module 7 Study Outline (Jul-Dec 2026) Topic 6 Technical Analysis, 6.6 Indicators; J. J. Murphy, Technical Analysis of the Financial Markets (NYIF, 1999), ch. on moving averages (as at October 2026).
Using 1/n as the weight. The EMA's 2/(n + 1) weighting is what makes it react faster than a simple average.
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