Description

• ZLEMA is variant of EMA built to reduce lag in tracking current price trend more closely. It gives more weightage to recent data. EMA is a cumulative average, whereas ZLEMA calculates the average for specified period
• A lag is calculated that involves subtraction from the specified period. The price value at the position of calculated lag is subtracted from current price
• It is more sensitive and effective for price trend reversals

Interpretation

• Similar to other averages, ZLEMA is also used for confirming trends and overall price direction
• The price line moving above the WMA indicates an uptrend suitable for Buy trades
• The price line moving below the WMA indicates an downtrend suitable for Sell trades
• Plotting two or more ZLEMA can be used for crossovers

Default Parameters Used/Inputs

• Data line- Close line, High line, Open line, Low line or others
• Bars – number of bars for which ZLEMA has to be calculated

Returns/Output

ZLEMA graph line with eliminated lagging of past data

Formula

K = 2/(n-1)
lag = n-1/2
ZLEMA = K x (2 x price(0) - price(lag))+(1-K) x ZLEMA