Exponential Moving Average (EMA) is one of the essential technical indicator used widely by traders and investors . Exponential Moving Average (EMA) gives more weighting to recent price data compared to Simple Moving Average (SMA) . EMA is quite similar to SMA as it helps traders to measure trend direction of any security thus helps in predicting the future trend . Essentially its a trend direction indicator .(EMA) is used to know long-term trends . EMA gives more accurate recent price action compare to SMA . This is because EMA uses the latest data point and the oldest data point gets the least observation .
- A falling EMA indicates that prices, on average, are falling. Hence this moving can be used to determine buying and selling opportunities in market .
- A rising moving average shows that prices are generally increasing. Therefore one should look at buying opportunities.
- A long-term MA moving from a lower position to a higher one reflects a long-term uptrend.
- A long -term plunging MA , moving from a higher to a lower level reflects a long-term downtrend.