Glossary
Exponential moving average (EMA)
A moving average that weights recent prices more heavily, so it reacts faster than a simple moving average of the same length.
On this page
An exponential moving average (EMA) is a running average of price in which each new bar carries a fixed fraction of the weight and every older bar's influence decays geometrically. Because the latest closes count for more, an EMA turns sooner than a simple moving average of the same period, which is why traders use it for faster trend filters and why it sits inside indicators such as MACD.
How it works
Each update blends today's close with yesterday's EMA using a smoothing factor that depends only on the period N.
The first value is usually seeded with a simple average of the first N closes. After that, no bar ever fully drops out; it simply fades.
What to watch for
Faster is not the same as better. The quicker response that catches a new trend a few bars earlier also produces more whipsaws in a sideways market, where price crosses the line back and forth. Two EMAs computed from different seeds or different data start dates can differ slightly for a while, so values on two platforms may not match to the cent. Common periods are 9, 12, 20 and 26 for short-term work and 50 or 200 for longer trends; none of them is special beyond convention.