Also called Exponential moving average

EMA

An average of recent prices that weights the latest days most heavily, so it turns faster than a simple average. A fast one crossing above a slow one is the classic trend signal.

Updated 2026-09-03

An exponential moving average is the average price over some window, weighted so recent days count for more than older ones. A 20-day EMA responds to this week; a 200-day EMA describes the year.

The exponential weighting is what separates it from a simple average. A simple 50-day average treats the price from 50 days ago exactly as heavily as yesterday's, and drops the 51st day entirely, which produces a jolt for a reason that has nothing to do with today. An EMA fades old data out smoothly instead.

What it is used for

Almost every trend signal is built from two of them. When a fast EMA crosses above a slow one, recent prices have moved above the longer-run average, which is a mechanical definition of an uptrend beginning. It is the basis of the macd and of most crossover strategies.

A moving average is a lagging measure by construction. It cannot tell you a trend has started; it can only tell you one started some days ago. That lag is the price of filtering out noise, and shortening the window to reduce it buys more false signals rather than earlier true ones.

See also

  • MACD — The gap between a fast and a slow moving average, plotted against its own average. Widening upward means momentum is building, narrowing means it is fading.
  • Signal confidence — The weighted entry score a bar must clear before the strategy opens a trade, built from trend and momentum agreement. It says nothing about whether a stock is cheap.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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