Ema (Exponential Moving Average)
| An exponential moving average (EMA) is a type of moving average that is similar to a simple moving average, except that more weight is given to the most recent data. The exponential moving average is also known as the exponentially weighted moving average. The exponential moving average is used to show the recent changes in price while maintaining the observations of older charts. The EMA is calculated by taking the weighted average of the last n prices, where the weighting factor is equal to the exponential of the number of periods in the past. For example, suppose the last five prices of a stock are 25, 26, 27, 28, and 29. The EMA would be calculated as follows: EMA = (25 * 0.1) + (26 * 0.2) + (27 * 0.4) + (28 * 0.8) + (29 * 1.6) EMA = 25.4 As you can see, the most recent price (29) is given the highest weighting (1.6), while the oldest price (25) is given the lowest weighting (0.1). The exponential moving average is a useful tool for traders because it can help to smooth out price data and make it easier to identify trends. The EMA is also used as a component of other technical indicators, such as the MACD (moving average convergence divergence). |
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