EMA
Technical Analysis
What it means
Exponential Moving Average: a moving average that gives more weight to recent prices, so it reacts faster to new price moves than the SMA.
Example
A 10-day EMA on the same data as a 10-day SMA will sit closer to the most recent prices. If price jumps from $100 to $110, the EMA turns up before the SMA does.
Mistake beginners make
Beginners assume the faster EMA is "better." Faster also means more false signals in choppy markets; the SMA is calmer and often more reliable in noise.
Related terms
- Moving Average — A line showing the average price over a set number of periods, which smooths out noise and…
- SMA — Simple Moving Average: the plain average of closing prices over a set period, where every …