IN PLAIN ENGLISH
Like an SMA, but recent prices count for more. If a stock just made a big move, the EMA reacts faster than the SMA. Traders use it when they want an early signal rather than a smooth one.
FULL DEFINITION
A type of moving average that assigns exponentially greater weight to more recent prices, making it more responsive to new information than a Simple Moving Average.
EXAMPLE
EMA 12 reacts quickly to a price jump; EMA 26 is slower. The gap between them is the basis of the MACD indicator. If EMA 12 crosses above EMA 26, that's a classic bullish crossover signal.
Educational content only. It is not personal financial advice.