EMA (Exponential Moving Average)
An EMA is a moving average that gives more weight to recent prices, making it more responsive to new information than a simple moving average. Common periods are 9, 21, 50, and 200.
Understanding the Concept
EMAs react faster to price changes, which is why active traders prefer them over SMAs. The 9 and 21 EMAs are popular for short-term trend following. Price above the EMA = bullish; price below = bearish. EMA crossovers (like 9 crossing above 21) signal trend changes. The 50 and 200 EMAs act as dynamic support/resistance on higher timeframes. "Golden cross" (50 above 200) is bullish; "death cross" (50 below 200) is bearish. EMAs work on any timeframe, but the signals are more reliable on daily and weekly charts.
Real-World Example
Bitcoin's 9 EMA crosses above the 21 EMA on the 4-hour chart—short-term momentum is turning bullish. Traders go long with stops below the 21 EMA.
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