What is the EMA indicator?
EMA stands for Exponential Moving Average which is understood as exponential average. Unlike the simple moving average (SMA), EMA uses an exponential formula for calculation. So, EMA has better sensitivity and reacts to price faster than SMA. Professional traders often use EMA to predict price movements in the short to medium term.
Compared to SMA, EMA tracks price trends better. It catches up with fluctuations faster. However, for this reason, EMA also filters out noisy signals worse than the SMA.
How EMA works
Like other moving averages, the basic signals that the EMA gives to traders are trend signals.
Specifically:
+ When the price is in an uptrend, the Japanese candlesticks are above the EMA which is pointing up.
+ When the price is in a downtrend, the Japanese candlesticks are below the EMA which is heading down.
