Exponential Moving Average

An exponential moving average (EMA) is a specific type of weighted moving average.  It uses a constant (a smoothing factor) between 0 and 1 in the following manner: the current closing price (C) multiplied by the smoothing constant (S) added to the product of the previous day’s exponential moving average value (PEMA) and 1 minus the smoothing factor, or:

Today’s EMA = S*C + (1-S)*PEMA

While the description and formula seems somewhat confusing, the approach is simpler to calculate than other moving averages because all you need is today’s closing price and yesterday’s EMA value.