This encourages the trader to take quicker trading decisions. The EMA gives a higher weighting to recent prices, while the SMA doles out equivalent weighting to all values. Though both SMA and EMA are for a 50 day period, you can notice that the EMA is more reactive to the prices and hence it sticks closer to the price. A 50-day SMA ( blue ) and a 50-day EMA ( red ) on nifty’s closing prices. The minute the EMA falls, you might consider selling when prices rally towards or just above the EMA. While the EMA rises, you might want to consider buying when prices dip close to or just below the EMA. Generally, Exponential moving averages (EMA) give more weight to the most recent periods of time. Take into account that EMA is usually more sensitive to price movement. The similar rules are applied to SMA while interpreting EMA. However, on the one hand where SMA merely computes an average of price data, EMA gives more weight to data that is more current. What is Exponential Moving Average – EMA?Įxponential Moving Average (EMA) is similar to Simple Moving Average (SMA), evaluating trend direction over a period of time.
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