Exponential Moving Average EMA

Exponential Moving Average EMA

The concept of moving averages with the Simple Moving Average SMA has an indicator to the mother as the most important properties a (legitimate) smoothing of the price performance and a delay component. The latter part (so to speak, a "chasing after" the indicator line) is trying to mitigate through various developments of the concept.

The second stage of development represents the Exponential Moving Average EMA, in contrast to the Weighted Moving Average WMA is not a linear weighting of price data used, but - as the name suggests - an exponential. While the SMA and also eliminates the WMA with each new trading period, the oldest value in favor of the current, takes place during an ongoing EMA calculation. The indicator value of the last trading period, a fraction of the current value is added. The exponential data weighting ensures that the older market prices from day to day are losing influence.

The main plus point of the EMA is the high sensitivity, with complete preservation of the smoothing properties of the delay component is significantly reduced, the indicator curve is much closer to the base price performance than the mathematical arithmetic means is the case. As for the comparison between the weighted and exponential moving average this way can hardly make a general statement which is preferable to average even if the EMA to play in theory and practice something more important.


The mathematical calculation of the EMA is relatively complex, as it is handled reliably in most cases by the various charting programs, the trader must hierum not care in detail. The crucial importance is the weighting factor plays, which is viewed by many sources from earlier days, a pure percentage (ie 1 divided by the calculation period), but is now found in most cases by dividing by 2 and (calculation period + 1). The Berechnungsperode (usually 10 or 5 days) is no less exclusively the determination of the weighting factor intended, since the indicator itself so all the base price data are used. The current EMA value is calculated by multiplying the difference from yesterday's price and based on current indicator value with the weighting factor and added to the indicator value is the previous period. Interpretation and Uses of the EMA models correspond to the average in the simpler species, a practice known extension is the Moving Average Convergence / Divergence - is an indicator that is based on two EMAs and represents the difference between shorter and longer average.

If instead the price of the volume to determine the weighting factor used so we come to the Elastic Volume Weighted Moving Average (EVWMA). It is also an exponential averaging, the daily change in trading volume provides here for a permanent adjustment of the weighting factor. To determine a standard value for the daily volume and a divisor is used for the Reagibilitätssteuerung. Trading periods with increasing volume go with a smaller weighting factor and a sluggish course associated indicator, periods with falling volume corresponding with a larger weighting factor and a higher sensitivity. The Elastic Volume Weighted Moving Average is often used as a trend filter (able to average closing price) and the signal generator (intersections Underlying / indicator).

A certain degree of practical relevance is also still the Modified Exponential Moving Average (MEMA) to this combined with the simple exponential moving average approach. MEMA, the first-value (nth term) corresponds to the SMA, the first n indicator values. The further calculation is then similar to the EMA but one Gewichtungsfaktort of 1 / n is used.