This is a discontinued signal line of a synthetic double smoothed Wilders Ema, with a choice of anchored or non-anchored dsl lines.
Wilders EMA vs Traditional EMA
The standard EMA (exponential moving average) formula converts the time to a fraction using the formula:
- EMA% = 2/(n + 1) where n is the number of days. For example, the EMA% for 14 days is 2/(14 days +1) = 13.3%.
- Wilders EMA uses an EMA% of 1/14 (1/n) which equals 7.1%.
Why did Welles Wilder use this formula?
Welles Wilder traded Daily charts and his EMA formula gives more emphasis to quick price movements. Although less laggy than the standard EMA, it's best used on timeframes above the 4 Hour chart to avoid false signals.
For lower timeframe traders, the traditional EMA is the more accurate choice but for longer-term traders, Wilders EMA is more sensitive to price movement and will assist in earlier entries and exits.
