Exponential Moving Average (EMA) is a technical indicator that helps traders identify the trend and potential entry and exit points. It is a type of moving average that gives more importance to the recent price data. This indicator is preferred by those traders who are looking for recent price changes of the asset.
EMA behaves more quickly as compared to the other moving averages whenever there is a fluctuation in the price of the asset. This EMA line is drawn by using the indicator, and thereafter, is used by the traders who wish to observe and act on the latest price movements. The exponential moving average consists of three lines. The uptrend in an EMA is represented by the candles when they are above the EMA lines. This is then called a bullish signal. Whenever a candle goes below the EMA line, it indicates a bearish market or downtrend. This is the reason why traders consider EMAs a great asset to conduct technical analysis. Being one of the top technical indicators, exponential moving average (EMA) has quite the reputation when it comes to predicting the direction of the market.