Moving averages are universally used in technical analysis and are represented in numerous forms from the simple moving average to the EMA, or Exponential Moving Average. Moving averages are known as what are called lagging indicators, this inherent lag is at least partially addressed by giving extra weight to more recent tick data, or price/point data, as in the weighted and exponential moving averages.

The idea behind the exponential moving average is that it provides stronger and earlier trend detection.

The EMA is also sometimes called an exponentially weighted moving average (ewma), as it applies weighting factors which decrease exponentially.

The two most popular types of moving averages are the simple moving average (sma) and the exponential moving average (ema). The average absolute difference between the exponential moving average and the current price was 1.

Some traders prefer to use exponential moving averages for shorter time periods to capture changes quicker. In the exponential moving average equation the most recent market action is assigned greater importance as the average is calculated. An exponential moving average is a more complicated form of a simple moving average, which calculates the average price of a market or surrency pair over a specific period of time.

Exponential moving average is also used to create other effective indicators like percentage price oscillator (ppo) and moving average convergence divergence (macd)exponential moving average, like the simple moving average, is the average of closing prices of a period.