How to calculate

**Dow Jones Exponential Moving Average**- illustrated with data in**excel spreadsheet**.
What is

**exponential moving average**(ema) and how is it different from**simple moving average**(sma)? Simple moving average takes an average of the no of days. So a 20 day**sma**would calculate an average of all the figures for preceding 20 days. In**EMA**, we give more weight to recent observations. This is done via using a factor called**exponent**.
The value for the exponent = 2/(No of days +1)

So for EMA of 20 days the exponent = .047619

Now we multiply today's closing figure with this exponent, and yesterday's EMA with (1-exponent) to get new ema. Obviously you have to start somewhere, so we start with a simple average for the first 20 data points and then move onto the EMA formula from there. Confusing? Have a look at the

Label: ema excel

**excel sheet**it will become a little more clearer as to what it is that I am talking about and how exactly it is calculated.Label: ema excel