Weighted MA Function

Notes:

These indicators and concepts are specifically designed for TradingView.com

Overview

This specific indicator has the ability to be both a WMA or a SMA however in context with how it is used within Evolve Algo we believe that it is best paired as a WMA. A weighted moving average (WMA) is a popular technical analysis tool used by traders to identify trends and potential buying or selling opportunities in the market. It is a type of moving average that places more weight on recent price data points compared to older ones. This gives greater significance to the most recent price movements and can help traders identify trend changes more quickly.

How to Trade

Traders use weighted moving averages in a variety of ways. One common strategy is to look for crossovers between the price and the moving average. For example, if the price crosses above the moving average, this could be seen as a bullish signal, while a cross below the moving average could be seen as bearish. Another approach is to look for divergences between the price and the moving average. For example, if the price is making higher highs while the moving average is making lower highs, this could be a sign of weakness in the trend and a potential opportunity to sell. Traders may also use multiple weighted moving averages, with different periods, to generate trading signals. For example, a trader might use a shorter-term moving average to generate buy and sell signals in the short-term, while using a longer-term moving average to identify the overall trend.

Weighted MA

How to Calculate

The calculation of a weighted moving average involves assigning weights to each price point in the series, with the most recent price points given the highest weight. The formula for calculating a weighted moving average is:

WMA = (Pn * n + Pn-1 * (n-1) + ... + P1 * 1) / (n + (n-1) + ... + 1)

Where:

• WMA is the weighted moving average
• Pn is the most recent price data point
• n is the number of periods being averaged

For example, if a trader wants to calculate a 10-period weighted moving average, they would assign weights of 10, 9, 8, ..., 1 to the most recent 10 price points in the series, respectively. They would then calculate the weighted moving average using the above formula.

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