Exponential Moving Average (EMA) is one of forex technical indicator used in forex technical analysis. This indicator used by many traders and calculated by adding the moving average of a certain share of the current closing price to the previous value. With exponentially smoothed moving averages, the latest prices are of more value.

The EMA is very much like the simple moving average, except the average is weighted to place emphasis on the most recent price action.

The reason many technical analysts prefer the EMA is its ability to reduce the lag between EMA crosses, which acts as buy and sell triggers for active traders. The EMA is also used to construct other indicators, such as the ADX and MACD.

This type of moving average reacts faster to recent price changes than a simple moving average. The 12- and 26-day EMAs are the most popular short-term averages, and they are used to create indicators like the moving average convergence divergence (MACD) and the percentage price oscillator (PPO). In general, the 50- and 200-day EMAs are used as signals of long-term trends.

A sell signal occurs if the short and intermediate term averages cross from the top to the bottom the longer term average. On the contrary, a purchase signal happens if the short and intermediate term averages cross from bottom over the longer term average.