

Exponential Moving Average 





An exponential moving average is a more complicated form of a simple moving average, which calculates the average price of a security over a specific period of time. The exponential moving average gives more weight to the latest (most recent) price data and gives less weight to the older, more historical data. For example, in a 10day exponential moving average, the most recent 5 days have more value than the first 5. An exponential moving average actually reacts faster to recent price changes than a simple moving average. The idea behind the exponential moving average is that it provides stronger and earlier trend detection. The exponential moving average's method of giving more weight to recent data is essentially an attempt to reduce the lag of the simple moving average. One method for calculating an exponential moving average (EMA) takes a percentage (P) of today's total price (T) and adds in the prior day's exponential moving average (Y) times 1 minus that percentage: (T*P)+(Y*(1P)) = EMA. The exponential percentage (P) used to calculate an exponential moving average equals 2/(time periods+1).
Rate this exponential moving average definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: quality assurance, minority interest, command economy, Zero Cost Collar, APR, annual return, Key Rate Duration, average price per share, exdividend date, phantom income, risk management, in escrow, EBITDA, diluted share, option premium, cancelled check, covered put, required rate of return, labor relations, VIX, balance sheet, current ratio, LIBOR, real GDP, 401a, debt service coverage, 1031 exchange, margin rate, 144a, liquidity ratio, class C shares, whollyowned subsidiary, deferred tax, irrevocable trust, 1035 exchange, stock market close, deferred revenue, implied volatility, reverse mortgage, retained earnings, dividends payable, inflation, stock split, open position, limit order, exdividend, FICO score, FTSE, per diem


 