Description

• The WMA places more weight on recent changes compared to older data. It assigns multiplying factors to give different weights to different data points
• This indicator is similar to EMA. However, it differs in the calculation; moreover WMA is not a cumulative average unlike EMA
• Comparatively EMA gives a finer result

Interpretation

• The price line moving above the WMA indicates an uptrend suitable for Buy trades
• The price line moving below the WMA indicates an downtrend suitable for Sell trades

Default Parameters Used/Inputs

• Data line- Close line, High line, Open line, Low line or others
• Bars – number of bars for which WMA has to be calculated

Returns/Output

WMA graph showing emphasis of recent changes

Formula

WMA = Price(0)*n + Price(-1)*(n-1) + Price(-2)*(n-2) + ……….Price(1)*(n-3) + Price[-(n-1)]*1 / n
Here Price(0) indicates value of current period (day or month or other data period).
Similarly subscripts (-1), (-2)…etc indicate the previous xth position from current bar where ‘x’ is denoted in the brackets