What does EMA (Exponential Moving Average) mean?

The EMA is like the SMA but weights recent prices more heavily, so it reacts faster to new price moves.

The EMA is like the SMA but weights recent prices more heavily, so it reacts faster to new moves. Traders often pair the 12-EMA and 26-EMA to spot momentum shifts before a slower SMA would.

EMA (Exponential Moving Average) example

After a sharp three-day rally, a 10-day EMA bends upward faster than a 10-day SMA because it gives the most recent prices more weight — so it reacts sooner to the change.

Common beginner mistake

Thinking "faster" means better. An EMA reacts sooner to real moves but also to fake-outs, giving more false signals than an SMA of the same length.