What it is
An exponential moving average is a moving average that gives more weight to recent prices. It reacts faster than a Simple moving average (SMA) of the same length.
The formula
- Smoothing factor k = 2 / (N + 1). For a 12-day EMA, k = 2 / 13 = about 0.154.
- EMA today = price today x k + EMA yesterday x (1 - k)
- Start the series with the SMA of the first N days.
With k = 0.154, today's price makes up about 15% of the new value, and every older price fades a little more each day.
EMA versus SMA
| SMA | EMA | |
|---|---|---|
| Weighting | Equal | Recent prices count more |
| Reacts to change | Slower | Faster |
| False signals | Fewer | More |
Where you see it
The 12-day and 26-day EMAs build the MACD indicator indicator. Short-term traders often prefer EMAs; long-term investors usually use the 200-day SMA.
See also
- Simple moving average (SMA) What a simple moving average is, how to calculate it, the common 50-day and 200-day averages, and how investors use them to read a trend.
- MACD indicator How the MACD indicator is built from two exponential moving averages, what the signal line and histogram show, and how crossovers are read.
- Momentum investing What price momentum is, the evidence that recent winners tend to keep winning for a while, how momentum is measured, and its crash risk.
Last updated September 30, 2026. Education only, not investment advice.