The EMA Signal Advantage

The Exponential Moving Average (EMA) is like the Moving Average (MA) with one important improvement. The MA is an average calculation giving equal weight to each time period. The EMA calculation assigns higher weights to the most recent time periods when calculating the average. Hence, many technical analysts prefer EMA to MA given it tends responds more quickly to recent price trends. In short, the MA lags too much compared to the EMA.

A bullish signal is when the shorter time period EMA has a greater value than the longer term period; a bearish signals can occur when the EMA for a short time period is less than the EMA for the longer time period. For example, a bullish signal occurs if the 1-hour EMA price for Bitcoin is $25,445 while the 4-hour EMA price is $25,285 (the 1-hour EMA > 4-hour EMA).

Many times algorithmic indicators utilize EMA time comparisons as a building block for their analysis. For example, the MACD and the QC Trend algorithmic values are both based on specific EMA calculations and comparisons.