EMA stands for Exponential Moving Average. It’s one of the most basic indicators that shows the recent average of the price. It’s been used by statisticians for many years. Usually EMA alone is not the best indicator, however it works well when combining it with other indicators. EMA is a lagging indicator, and the higher the number of periods, the higher the lag.
EMA is just an average of the recent price. It often helps to compare the EMA to the current coin price. Take the difference between the coin price and EMA. If the difference is positive – that means the coin is going up. If negative – that means the coin is going down.
EMA calculation starts by figuring out the multiplier. It’s a one time calculation. Then using that multiplier to find the actual EMA value.
EMA function has one parameter (X), where X is the number of ticks the average is calculated for. EMA(20) means that we calculate the average for the last 20 ticks.
Multiplier formula: (2 / ( X + 1)). If X is 20, then the multiplier is 0.09524
EMA formula: (Current Price - Previous EMA) * multiplier + Previous EMA
To compare EMA price to the current price, we simply subtract EMA from the Current Price and call it EMA Diff.
EMA Diff is always relative to the price of the coin, making it difficult to compare EMA diff of one coin to another. To solve this problem, we can divide EMA Diff by the coin price and multiple by 100.
StockCharts.com - Deeper dive into EMA