Exponential moving average of stocks
The exponential moving average is a line on the price chart that uses a mathematical formula to smooth out the price action. It shows the average price over a certain period of time. The EMA formula puts more weight on the recent price. This means it’s more reliable because it reacts faster to the latest changes in price data. A five-day simple moving average (SMA) adds up the five most recent daily closing prices and divides it by five to create a new average each day. Each average is connected to the next, creating the An exponential moving average (EMA) has to start somewhere, so a simple moving average is used as the previous period's EMA in the first calculation. Second, calculate the weighting multiplier. Third, calculate the exponential moving average for each day between the initial EMA value and today, using the price, the multiplier, and the previous period's EMA value.