Studies Calculations

Weighted Moving Average (WMA)

Overview

What is Weighted Moving Average?

Weighted Moving Average is a trend-following device whose purpose is to identify or signal that a new trend has begun or that an old trend has ended or reversed.  A Weighted Moving Average differs from a Simple Moving Average in that greater weight is given to the more recent closings for the given period.

Formula

Where Ct is the close price on day t and N is the number of periods back.

Parameters

The price series (close values) and the period n are configurable input parameters.

Reference  

Murphy, John J., Technical Analysis of the Future Markets, New York Institute of Finance, New York, NY, 1986.