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Exponential Moving Average (EMA)
Technical Analysis
An EMA is a moving average that gives more weight to recent prices than to older ones.
It therefore reacts faster than a simple average when price changes direction, but it is also more easily pulled around by short swings. Each day the new close enters the average with a weight of 2 / (number of periods + 1). Other indicators such as MACD are built on EMAs.
Example
In a 10-day EMA the new day's weight is 2 / 11, about 18%. If yesterday's EMA was $50 and today's close is $55, the new EMA is about 50 + 0.18 × 5 = $50.90.
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