What Is an Exponential Moving Average (EMA)?
An EMA is a moving average that weights recent prices more heavily, so it reacts faster than a simple average. Here is the calculation and how the 20, 50 and 200 EMAs are used.
EMA vs simple moving average
A simple moving average (SMA) gives every price in the window equal weight. An EMA gives the newest price the most weight and lets older prices fade, so it turns sooner when the trend changes, at the cost of a few more false turns.
The formula
multiplier = 2 / (N + 1) EMA today = Close × multiplier + EMA yesterday × (1 − multiplier)
The first EMA value is usually seeded with the SMA of the first N closes.
Worked example (5-period EMA)
With N = 5 the multiplier is 2 / 6 = 0.3333. Using these illustrative closes: 20, 21, 22, 21, 23, 24, 23. The seed on day 5 is the average of the first five closes = 21.40.
| Day | Close | 5-EMA |
|---|---|---|
| 5 | 23 | 21.40 |
| 6 | 24 | 22.27 |
| 7 | 23 | 22.51 |
Day 6: 24 × 0.3333 + 21.40 × 0.6667 = 22.27. Each new day repeats the same step.
The 20, 50 and 200 EMA
- 20 EMA: short-term trend. Strong stocks often pull back to it and bounce.
- 50 EMA: medium-term trend, commonly watched by swing traders.
- 200 EMA: the long-term dividing line. Many investors treat price above the 200 EMA as an uptrend and below it as a downtrend.
When the 50 EMA is above the 200 EMA the market is said to be in a "golden cross" state, and the reverse is a "death cross". Both are lagging confirmations, not predictions.
Practical rules
- Check where price sits relative to the 200 EMA before using any oscillator signal.
- Distance matters: a stock 40% above its 200 EMA is extended. One 3% above it has a nearby reference level.
- EMAs act as a zone, not an exact line. Expect price to overshoot slightly.
See it on live data
The EMA screener lists stocks above all three EMAs with the 50 above the 200, ranked by distance from the 200 EMA. Combine it with RSI and MACD.
Open the free scanner (no signup)
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Educational content only, not investment advice. Worked examples use illustrative numbers. See our disclaimer.