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Exponential
Moving Average (EMA) |
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The average price of a security over a user defined time period with more weight given to recent data.
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Technical
traders use the EMA to determine directional momentum. A short-period
and a long-period EMA are plotted on a chart. When the short-term
EMA moves above the long-term EMA the market is said to be gaining
upward momentum and vice versa if it moves below. If the two EMAs
appear to be moving horizontally and ‘kissing’ it
is a sign that momentum has died and may be due a sharp increase. |
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