Price / EMA Crossovers

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Price / EMA Crossovers

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Moving Averages (MA) help identify price trends and potential support and resistance levels.   Two main MA types are the simple and exponential.

Exponential moving average (EMA) puts greater weight on the most recent prices, and thus has less lag than an SMA; it will react quicker to price changes and is better used by short-term traders.

Price/EMA cross occurs when the price crosses an EMA, either above (bullish) or below (bearish).  Since Price moves faster than a moving average (EMA), this type of cross typically occurs before an SMA cross.  Hence, Price/EMA cross is more sensitive and provides earlier indications but can also give more false readings for trend developments.