|  MAR 1993

SIDEBAR: TREND CHANNEL SPREADSHEET

TREND CHANNEL SPREADSHEET The trend-following method uses exponential smoothed moving averages (EMA) of price data. The equation for an EMA requires the previous day's EMA for the calculation of today's EMA. Consequently, the first period's closing price will be used as the first period's EMA and the smoothing process begins with the second period. In the spreadsheet, cells B2, C2, D2 and E2 are the first period's closing prices. The first exponential smoothing of the data occurs in column C. This is the three-week EMA prefilter. The alpha constant is 0.5. To produce a filter with zero lag the calculation uses tomorrow's close in today's calculation. Therefore, you are always one period late for calculating the lead/lag filter. The formula for cell C3 is: =C2+0.5*(B4-C2) The next smoothing is the seven-week EMA, which occurs in column D. The formula for cell D3 is: =D2+$F$3*(C3-D2)

by Technical Analysis, Inc.