Technical indicators
Exponential moving average (EMA)
Definition
An EMA is a moving average that gives more weight to recent prices, so it reacts faster than a simple moving average. Common lengths are 9 and 20 for the short-term trend and 50 or 200 for the bigger picture.
Example
Say a stock’s 9-period EMA stands at $50.00 and the next candle closes at $52.00. The EMA gives the newest close a weight of 2 ÷ (9 + 1) = 0.2, so it moves to $50.00 + 0.2 × $2.00 = $50.40. In a 9-period SMA, that same close counts for only one ninth, about 11%, which is why the EMA turns first.
Hypothetical numbers, for illustration only.
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