Exponential Moving Average (EMA)¶
The exponential moving average (EMA) is a trend-following indicator that calculates an average price while assigning exponentially decreasing weight to older bars. Unlike a simple moving average, which weights every bar equally, the EMA responds faster to recent price changes. This makes it more sensitive to reversals but also more prone to false signals in choppy conditions.
HOW IT WORKS¶
The EMA is calculated recursively using a smoothing multiplier derived from the chosen period:
Multiplier: k = 2 / (N + 1)
EMA today: EMAₜ = (Priceₜ × k) + (EMAₜ₋₁ × (1 − k))
The first value is seeded with a simple moving average of the first N bars, then the formula runs forward. Every prior bar retains some influence, but its weight decays exponentially toward zero. Common periods are 9 and 21 (short-term momentum), 50 (intermediate trend), and 200 (long-term trend).
Example — AAPL 9-EMA: If price closes at $230.00 and yesterday's EMA was $226.50, with k = 0.20:
EMA = (230.00 × 0.20) + (226.50 × 0.80) = $227.20
IN TAPEBOARD¶
In the Tapeboard terminal, the EMA is available as a chart overlay on any supported symbol and timeframe. Traders commonly apply it in three ways:
- Trend filter: Set a 50-EMA overlay and restrict entries to the direction of its slope — long-only above a rising 50-EMA, flat or short below a falling one.
- Dynamic support and resistance: In strong trends, the 9- or 21-EMA acts as a reference line for pullback entries, with stops placed just beyond the line.
- Crossover signals: The 9/21-EMA cross is a common momentum trigger. The 50/200-EMA cross produces the golden cross and death cross signals.
Note that EMA values can differ slightly between platforms depending on how much historical data is loaded at calculation time.