What is an Exponential Moving Average (EMA)?

What is an Exponential Moving Average (EMA): A technical analysis indicator consisting of a moving average that places mathematically greater weight on more recent prices. EMAs are generally used to define trends and smooth fluctuating price action.

Category: Technical analysis indicator

How is an Exponential Moving Average (EMA) Used: An EMA reacts more sensitively to recent price, as opposed to the equally-weighted Simple Moving Average (SMA). EMAs are most often used to denote trends in a market by the slope of the moving average as well as whether price is above or below the moving average. EMAs can also be used to trigger trade entries/exits through the use of crossovers, as well as to define dynamic support and resistance levels. The purpose of having more sensitivity to recent prices is to help reduce the price-lagging nature that all indicators and moving averages share.

What Does an Exponential Moving Average (EMA) Consist of: An EMA consists of one fluctuating moving average line overlaid directly on top of a price chart. Trends, crossovers, and support/resistance are then determined based on the spatial relationship between price and the EMA.

What Does an Exponential Moving Average (EMA) Look Like:

Chart of an Exponential Moving Average (EMA)
Chart of an Exponential Moving Average (EMA) – Source: TheTechnicals.com and TradingView

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