What is EMA?
A moving average that gives more weight to recent prices, making it more responsive to new information.
Think of it like this
Like tracking your recent test scores where last week's grades matter more than last month's.
Formula
EMA = (Price × k) + (Previous EMA × (1-k)), where k = 2/(n+1)- Price: Current closing price
- k (Smoothing): Weighting multiplier for the period
Why it matters
- Reacts faster to price changes than SMA
- Popular for short-term trading signals
- EMA crossovers signal trend changes
- Used in MACD calculation
What's a good value?
Price > EMA
Bullish
Price above average, uptrend
Price < EMA
Bearish
Price below average, downtrend
EMA12 > EMA26
Buy Signal
Short-term trend strengthening
EMA12 < EMA26
Sell Signal
Short-term trend weakening
Real-world example
If EMA(12) crosses above EMA(26), it's a bullish signal suggesting upward momentum.
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