Oanda EMA

[azolotnitsky]

Hi all!

I've been strugling recently to understand how EMA is calculated. I use Oanda FXTrade, but their calculations never match my - please find mistake:

Let's use a hypothetical example of the follwoign prices to make it easier:

Hour1 1
Hour2 2
Hour3 3
Hour4 4
Hour5 5
Hour6 6
Hour7 7
Hour8 8
Hour9 9
Hour10 10
Hour11 11
Hour12 12

Now we want to calculate EMA using their formula fxtrade.oanda.com/learn/graphs/overlays/ema.shtml

First we calculate SMA for first EMA_yersterday (SMA(6) for hours 1-6)
SMA(6) = (1+2+3+4+5+6)/6 = 3.5
EMA(1) = alpha * price_hour7 + (1-alpha) * yesterdayEMA = 2/7 * 7 + 5/7 * 3.5 = 4,5
EMA(2) = alpha * price_hour8 + (1-alpha) * yesterdayEMA = 2/7 * 8 + 5/7 * 4.5 = 5.5
EMA(3) = alpha * price_hour9 + (1-alpha) * yesterdayEMA = 2/7 * 9 + 5/7 * 5.5 = 6.5
EMA(4) = alpha * price_hour10 + (1-alpha) * yesterdayEMA = 2/7 * 10 + 5/7 * 6.5 = 7.5
EMA(5) = alpha * price_hour11 + (1-alpha) * yesterdayEMA = 2/7 * 11 + 5/7 * 7.5 = 8.5
EMA(6) = alpha * price_hour12 + (1-alpha) * yesterdayEMA = 2/7 * 12 + 5/7 * 8.5 = 9.5

But when I apply this method to real-time data taken from Oanda in the program I have written it is slighltly different from the Oanda indicators. The difference is quite small 0.0001-0.0002 but at the same time big enough to be introduced by absolute/fractional error or by lost of precision.

What is wrong? Thanks for help

[azolotnitsky]

Common, nobody knows how EMA is calculated??

[pipso facto]

I don't know if this helps, but this is the formula I use to calculate the EMA:

Current EMA = Previous EMA + (Current Price - Previous EMA) / Time Constant

I try to compare my results to yours, but I don't know what the variable ALPHA represents in your formula. Maybe you can let me know.

In the meantime, I would contact Oanda to get their formula, then see if there is a slight difference in the way they calculate theirs.

Let me know your thoughts, as I am interested in details as well

[forexdaddy]

MA as calculated based on previous prices. The reason that your MA calculations do not match Oandas is that you are both using different prices. No 2 brokers have the same Open Close High Lows!!! The benefit of the "unregulated market".

[pipso facto]

Originally Posted by forexdaddy

MA as calculated based on previous prices. The reason that your MA calculations do not match Oandas is that you are both using different prices. No 2 brokers have the same Open Close High Lows!!! The benefit of the "unregulated market".

I don't know what "different" prices you think he's using, but since he is using FXTrade, the Oanda platform, I think it's safe to assume that he's using Oanda's prices no?

Good point on the different broker's quotes though, I am amazed at the huge differences at times.

[forexdaddy]

hmm..yes...should have elaborated. Well, the thing is the Fx companies
readjust historical prices at least once a week (courtesy of the unregulated FX market). In Oanda's case that maybe every day .

Ergo, the prices they dispense to the public is NOT the same as the prices they use for calculations. The difference may very from a 1 pip on every other candlestick to a lot more than just 1 pip.

While unethical, it is not illegal! (Again, courtesy of the unregulated FX market).