what is an exponential moving average ema 
an exponential moving average ema is a type of moving average ma that places a greater weight and significance on the most recent data points 1 the exponential moving average is also referred to as the exponentially weighted moving average an exponentially weighted moving average reacts more significantly to recent price changes than a simple moving average simple moving average sma which applies an equal weight to all observations in the period investopedia daniel fishelformula for exponential moving average ema e m a today value today smoothing 1 days where begin aligned begin aligned ema text today left text value text today ast left frac text smoothing 1 text days right right ema text yesterday ast left 1 left frac text smoothing 1 text days right right end aligned textbf where ema text exponential moving average end aligned ematoday valuetoday 1 dayssmoothing where while there are many possible choices for the smoothing factor the most common choice is that gives the most recent observation more weight if the smoothing factor is increased more recent observations have more influence on the ema calculating the emacalculating the ema requires one more observation than the sma suppose that you want to use 20 days as the number of observations for the ema then you must wait until the 20th day to obtain the sma on the 21st day you can then use the sma from the previous day as the first ema for yesterday the calculation for the sma is straightforward it is simply the sum of the stock s closing prices during a time period divided by the number of observations for that period for example a 20 day sma is just the sum of the closing prices for the past 20 trading days divided by 20 2next you must calculate the multiplier for smoothing weighting the ema which typically follows the formula 2 number of observations 1 for a 20 day moving average the multiplier would be 2 20 1 0 0952 finally the following formula is used to calculate the current ema 3the ema gives a higher weight to recent prices while the sma assigns equal weight to all values the weighting given to the most recent price is greater for a shorter period ema than for a longer period ema 4 for example an 18 18 multiplier is applied to the most recent price data for a 10 period ema while the weight is only 9 52 for a 20 period ema there are also slight variations of the ema arrived at by using the open high low or median price instead of using the closing price 