EMA (Exponential Moving Average)
Also called: EMA, exponential moving average, EMA 20, EMA 50.
Formula
alpha = 2 / (period + 1). New EMA = prior EMA + alpha x (new close - prior EMA). The desk starts from the first reached close. With period 3 and closes 100 then 104, alpha is 0.5 and the next EMA is 102.
How it is read
Compare both lines on the same chart interval. A shorter period follows a change faster. A longer period smooths it more and takes longer to turn. EMA 20 is not the simple average of only the last 20 closes. Earlier prices still have smaller weights. The desk's first reading is its first close. Another chart that starts from an earlier history or a simple-average seed can show different early values. A forming candle can still change, so its EMA can change too.
What it does not tell you
EMA describes prices already reached. It does not tell you what comes next. Price can cross the line many times in a sideways market. The crossing alone is not an order rule. The line uses price, without order-book depth, spread or costs. An index line also does not show an option's premium. On this desk a missing close has no reading, while the next valid close continues the previous EMA. Missing data is never a zero price.
Related concepts
Watch candles on the practice desk
Open the NIFTY and BANKNIFTY practice desk. Compare the chart with the idea explained here.