Exponential Moving Averages

What is Exponential Moving Averages?

The exponential moving average works with the most recent data points. One of the best technical trading indicators, EMA is known for its ability to forecast the movement of the market. Technical indicators are typically employed in conjunction with EMAs to confirm and evaluate significant market developments. It works especially well for traders who want to transact in volatile markets. This indicator is widely employed to find a bias in trading.

Since an EMA uses the most current price data, calculating its EMA is a little challenging. Although both the EMA and SMA (Small Moving Averages) contribute significantly, the EMA is more responsive to sudden changes in the market and prices.

The following are the recommended settings for the exponential moving average (EMA):

8-day and 20-day EMAs are more popular among day traders.

50-day and 200-day EMAs are used mostly by long-term traders.