Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Exponential Moving Average

What it is:

An exponential moving average (EMA) is a moving average for time-series data which places greater weight on more recent data.

How it works (Example):

An exponential moving average places exponentially greater weight on data in a time series as the data becomes more recent. For instance, in a 10-day price chart for a given security, the prices on the ninth and tenth days will be weighted more heavily as components of the average.

Why it Matters:

Since an EMA is weighted more heavily on recent data, it is more sensitive to daily price fluctuations. For this reason, instances of high volatility result in volatile moving averages.