Exponential Moving Average (EMA)

Description

EMA stands for Exponential Moving Average. It helps to smooth the price curve for better trend identification. Unlike the SMA, EMA places greater importance on recent data.

Formula

Take current price and multiply it by a constant, C. Take previous period’s EMA and multiplay it by 1 minus that constant, C. Add the two values together.

exponential moving average

If you are calculating your first EMA value where there is no previous day’s EMA, use SMA instead.

The formula for deriving the value of the constant, C is:

ema constant