Weighted Moving Average Explained - Calculation, Formula and Tips for Traders

The weighted moving average is a technical indicator that determines trend direction. It generates trade signals by assigning a greater weight to recent data points and less weight to past data points. The data points are usually asset close prices. It is a step further and more accurate than the simple moving average (SMA), which determines market movement by assigning identical weights to all the numbers in a given data set. The WMA essentially computes the average of given input values over specified time periods by giving greater weight to more recent data. This is done by multiplying a weighting factor by each bar’s price in a given set and then summing up the resulting values. It is then used to smooth the data series to help filter market noise and make it easier for traders to identify data trends. For instance, when the price moves towards or goes above the WMA line on the chart, it could signal that a price drop in the short-term is imminent. Therefore, traders should exit the trade. However, if the price dips near or just below the WMA line, it could mean that the price may soon go up. Therefore, it’s a favorable time to enter the trade. Whether you want to know more about the Weighted Moving Average or any other topics, Earn2Trade has you covered! ----------------------------------------------------------------------------------------------------------------------------------------------------- Read more about it here: https://e2t.to/2BnP5g0 Get Funded With Earn2Trade! Challenge The Gauntlet Mini™, our intraday futures trading evaluation. The Gauntlet Mini™: https://e2t.to/2BnP5g0 0:00 Music Intro 0:26 Intro 2:00 The history of the WMA 3:23 WMA in detail 4:57 Compared to an SMA 6:01 The formula 6:28 The calculation 8:12 Example math 9:30 Value behind the WMA 12:50 Conclusion