Technical Analysis
EMA (Exponential Moving Average) — Definition & Example
A moving average that weights recent prices more heavily, reacting faster to changes than SMA.
EMA applies a multiplier so recent prices contribute more to the average than older prices. The result is a faster, more responsive line — useful for shorter-term setups but more prone to whipsaws than SMA. The 20 EMA and 50 EMA are common choices for intraday and swing trading respectively. Crossovers between fast and slow EMAs are popular trend signals.
Formula
EMA(today) = (Close × multiplier) + EMA(yesterday) × (1 − multiplier); multiplier = 2 / (N + 1)Example
A stock's 20 EMA is at ₹500 while the 50 EMA is at ₹490. Price pulls back to ₹502. The 20 EMA acts as dynamic support; many traders buy this kind of pullback in confirmed uptrends.
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