Forex glossary
Exponential Moving Average (EMA)
EMA is an exponential moving average updated from its previous value and a new price observation. A common coefficient for N periods is 2/(N+1), weighting newer data more heavily. Initialization and prior history affect the result; it remains a measure based on past prices.
Illustrative example
How does it work in practice?
Assume a three-period EMA with a 0.5 coefficient and a previous value of 100 USD. A new price of 104 USD updates EMA to 102 USD; an initial value is already assumed.
A case to work through
Two starting values
Hypothetically, the EMA coefficient is 0.2 and the new price 110; two previous EMAs are 100 and 102.
- The first gives 0.2×110+0.8×100=102.
- The second gives 0.2×110+0.8×102=103.6 despite the identical new price.
What follows? Check history and initialization before treating the difference as a platform error.
Example boundary: The coefficient is specified here; other settings change the results.
One EMA update
Text description of the diagram
- Previous EMA: History and initialization determine the prior reading.
- New observation: Weight α for price and 1−α for the prior EMA.
- Updated EMA: Combine both components using the same formula.
A useful distinction
Exponential Moving Average (EMA) / Simple Moving Average (SMA)
EMA carries the earlier reading with decaying weight; SMA gives equal weights within a finite window.
Check your understanding
Calculate one EMA update with a specified coefficient.
Show the answer and explanation
52
0.5×54+0.5×50=52.
Direction and strength tools
Step 3 / 8 · 0 / 8 reviewed
View the full sequence →Progress is saved only in this browser.
Read the fuller explanation
Related terms
Sources and documentation
- MetaTrader 5 – moving averages
SMA window averaging and EMA updates from the prior value plus a new observation.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.