Hi Tom - I am a subscriber of yours and was wondering if you had a "conversion" chart for converting trend value % into period exponential MAs. for example, 10% Trend is roughly equal to a 19-period EMA, 1% TV to 200EMA etc. Thank you in advance.The formula for converting an exponential moving average (EMA) smoothing constant to a number of days is:

   2
-------
 n + 1

where n is the number of days.  Thus, a 19-day EMA would fit into the formula as follows:

    2             2
--------- =  ------- = 0.10, or 10%
 19 + 1        20

You can read one of the original pieces ever written about this concept by going to http://www.mcoscillator.com/reports/special/McClellan_MTAaward.pdf.  There, we excerpt from P.N. Haurlan's pamphlet, "Measuring Trend Values".  Haurlan was one of the first people to use exponential moving averages to track stock prices back in the 1960s, and we still prefer his original terminology of a XX% Trend, rather than calling an exponential moving average by some number of days.  One big reason for this is that with a simple moving average (SMA), you are only looking back a certain number of days.  Anything older than that lookback period does not factor into the calculation.  But with an EMA, the old data never disappears; it just becomes less and less important to the value of the moving average.

To understand why technicians care about EMAs versus SMAs, a quick look at this chart provides some an illustration of the difference.  During trending moves upward or downward, a 10% Trend and a 19-day SMA will largely be right together.  It is during periods when prices are choppy, or when the trend direction is changing, that we see the two start to move apart.

Tom McClellan
Editor
McClellan Market Report