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What is the Exponential Moving Average (EMA)?
The exponential moving average is a moving average that gives more weight to recent prices. It reacts to new moves faster than a simple moving average of the same length.
EMA = Price × k + Previous EMA × (1 − k)
The first EMA value is the simple average of the first N prices. Every value after that builds on the one before it.
How to read it
- Price above a rising EMA suggests upward momentum. Price below a falling EMA suggests downward momentum.
- Because it reacts quickly, the EMA is popular for short-term trading. 9, 20 and 50 are common lengths.
- Each EMA value depends on all the values before it, so give long lengths plenty of history. Two years or more is a good start.
Common questions
Why does history length change my EMA slightly?
The EMA is a running calculation that starts from the first bars you load. With more history, the early starting effect fades. That is why a longer range gives values closer to those on charting platforms.
What does the multiplier k mean?
It is the weight given to the newest price. For a 20-length EMA, k is about 0.0952, so each new price counts for roughly 9.5% and the previous EMA for the remaining 90.5%.
Can I use a price other than the close?
Yes. Choose Open, High, Low, HL2, HLC3 or OHLC4 in Settings. Most traders use the close.