The exponential moving average (EMA) assigns more weight to recent data points compared to older data points. It is calculated by taking the previous EMA value and adding a percentage of the difference between the current closing price and the previous EMA. This percentage decreases exponentially as the data points get older. An example calculates the 10-day EMA for stock closing prices, applying an 18.18% weighting to the most recent price. The EMA responds more quickly to recent price changes than the simple moving average but can also generate false signals about market trends.

1. Exponential Moving
Average (EMA)
By ALFIRAMITA HERTANTI
1111040151
Icp 2011
REVISI

2. DEFINITION
The Exponential Moving Average (EMA) is an average
weighted price data that puts a higher weight on recent
data points.

3. CONCEPT
The concept used is basis of the EMA is not only of past
price alone, but from the calculation of the moving
average of the past.

4. CALCULATION
calculate the simple
moving average
calculate the weighting
multiplier
calculate the exponential
moving average

5. FORMULA
EMA (current) = 𝑪 − 𝑷 𝒙 𝑲 + 𝑷
𝐾 𝑝𝑒𝑟𝑠𝑒𝑛𝑡𝑎𝑠𝑒 =
2
1 + 𝑁
N : Time Periods
C : Price (current)
P : The value of Previous EMA
K : Multiplier
Where

6. example
There closing prices from the stock of Eastman Kodak (EK). As Table 1.1 below.
Day Daily Close
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
$ 60.33
$ 59.44
$ 59.38
$ 59.38
$ 59.22
$ 59.88
$ 59.55
$ 59.50
$ 58.66
$ 59.05
$ 57.15
$ 57.32
$ 57.65
$ 56.14
$ 55.31
$ 55.86
$ 54.92
$ 53.74
$ 54.80
$ 54.86
First steps, we should be calculate the simple moving average
Day Daily Close 10-Day SMA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
$ 60.33
$ 59.44
$ 59.38
$ 59.38
$ 59.22
$ 59.88
$ 59.55
$ 59.50
$ 58.66
$ 59.05
$ 57.15
$ 57.32
$ 57.65
$ 56.14
$ 55.31
$ 55.86
$ 54.92
$ 53.74
$ 54.80
$ 54.86
$ 59.34
$ 59.02
$ 58.81
$ 58.64
$ 58.31
$ 57.92
$ 57.62
$ 57.16
$ 56.58
$ 56.19
$ 55.78
Table 1.2 Closing price of Stock Of EK for 10-Day SMA
Table 1.1 Closing Price for Stock of EK

7. Second, calculate the weighting multiplier.
Weighting Multiplier for a 10-day EMA.
2/ 𝑇𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 + 1 = 2/ 10 + 1 = 0.1818
= 18.18%
A 10-period exponential moving average applies an
18.18% weighting to the most recent price. A 10-period
EMA can also be called an 18.18% EMA.

8. Third, calculate the exponential moving average.
Table 1.3. Calculating for a 10-day EMA in EK (Eastman Kodack Co.)
EMA Period(N) : 10
Smoothing Constant (K): 0.181818
Period Date Close (C)
Previous
Period’s
EMA (P)
10- day
EMA (X)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
09-Nov-99
10-Nov-99
11-Nov-99
12-Nov-99
15-Nov-99
16-Nov-99
17-Nov-99
18-Nov-99
19-Nov-99
22-Nov-99
23-Nov-99
24-Nov-99
26-Nov-99
29-Nov-99
30-Nov-99
01-Dec-99
02-Dec-99
03-Dec-99
06-Dec-99
07-Dec-99
$ 60.33
$ 59.44
$ 59.38
$ 59.38
$ 59.22
$ 59.88
$ 59.55
$ 59.50
$ 58.66
$ 59.05
$ 57.15
$ 57.32
$ 57.65
$ 56.14
$ 55.31
$ 55.86
$ 54.92
$ 53.74
$ 54.80
$ 54.86
$ 59.439
$ 59.023
$ 58.713
$ 58.520
$ 58.087
$ 57.582
$ 57.269
$ 56.842
$ 56.278
$ 56.009
$ 59.439
$ 59.023
$ 58.713
$ 58.520
$ 58.087
$ 57.582
$ 57.269
$ 56.842
$ 56.278
$ 56.009
$ 55.800
𝐶 − 𝑃 = 57.15 − 59.439 = −2.289
𝐶 − 𝑃 𝑥 𝐾 = −2.289 𝑥 0.181818 = −0.4162
𝐶 − 𝑃 𝑥 𝐾 + 𝑃 = −0.4162 + 59.439 = 59.023

9. RESULT & CHART ANALYSIS

10. ADVANTAGES AND DISADVANTAGES
1. Exponential moving average (EMA)
is able to move quickly and well in
showing the recent price changes
2. Calculation using the EMA produce
an average value that comes closest
to the actual price when compared
to SMA.
1. Calculation of EMA is much more
complicated than in other types of
moving averages
2. Highly susceptible to getting false
signals in determining an ongoing
trend.