GlossaryBeginner
Exponential Moving Average (EMA)
A moving average that weights recent prices more heavily than older ones, making it react faster to new price changes than a simple average.
An Exponential Moving Average (EMA) is a moving average that applies exponentially decreasing weight to older prices, giving the most recent price the greatest influence on the current value.
This makes an EMA react faster to new price changes than a Simple Moving Average of the same length, at the cost of being more sensitive to short-term noise. See Kaavon's dedicated Exponential Moving Average article for the calculation and common uses, including as a building block for MACD.
Examples
- A 12-period and 26-period EMA are the two building blocks used to calculate the MACD indicator.
- An EMA generally turns direction sooner than an SMA of the same length, reflecting its heavier weighting of recent price action.