GlossaryEMA 20

EMA 20

The EMA 20 is an exponential average of the chart's last 20 candles. It shows the short-term trend and is one of the most widely used lines for pullbacks in a trend.

Calculation

\mathrm{EMA}_t = \alpha\,C_t + (1-\alpha)\,\mathrm{EMA}_{t-1}, \qquad \alpha = \frac{2}{20+1} \approx 0.095

$C_t$ is the closing price of candle $t$ . The first value is the average of the first 20 closing prices; after that, each new candle enters with about 9.5%. It is calculated on the chart's candles: over 20 hours on the 1H chart, over 20 days on the daily chart, so about one trading month for stocks. The current candle counts with its current price.

What it is used for

As a short-term trend line: in a healthy trend, the price runs above a rising EMA 20 and often returns to it on pullbacks. Many traders look for entries in the direction of the trend there.
As the fast line in crossovers with the EMA 50.
As the midline of the Keltner Channel, which by default also calculates on an EMA 20.

If the price closes clearly below a falling EMA 20 several times, the short-term trend has turned.

Settings

Setting	Default	Effect
Length	20	1–500 candles. The menu name stays, the line label shows the new length.

Tip For an EMA on a fixed timeframe, such as 20 days on the hourly chart, use the Exponential Moving Average (EMA) and its Timeframe setting.