What Is EMA (Exponential Moving Average)?
An Exponential Moving Average is a type of weighted moving average where recent prices have more influence on the average than older prices. The weighting decays exponentially, so the most recent candle has the largest impact and older candles fade in significance.
The most commonly watched EMAs are the 9, 20, 50, 100, and 200-period EMAs. The 9-EMA is favoured by short-term traders for fast trend signals; the 50-EMA defines intermediate trend; the 200-EMA is widely watched as a long-term trend filter ("price above 200-EMA = bull regime").
EMAs are reactive — they smooth price but pivot quickly when trends change. Simple Moving Averages (SMAs) are slower because they weight all candles equally. For active trading, EMAs are usually preferred; for long-term portfolio decisions, SMAs are arguably more honest because they don't overweight recent noise.
Related terms
- SMA (Simple Moving Average) — Moving average that gives equal weight to every period in the lookback window.
- MACD (Moving Average Convergence Divergence) — Trend-following momentum indicator showing the difference between two exponential moving averages.
- Moving Average — A line plotted on a chart showing the average price over a chosen lookback period.