Definition
WMA assigns linearly increasing weights to more recent prices. The most recent price gets the highest weight, the second most recent gets slightly less, and so on. It's more responsive than SMA but uses different weighting than EMA.
Formula
WMA = (P1×n + P2×(n-1) + ... + Pn×1) / (n×(n+1)/2)
Example
For a 5-day WMA: weights are 5,4,3,2,1 (sum=15). If prices are $50,$51,$52,$53,$54, WMA = (54×5+53×4+52×3+51×2+50×1)/15 = $52.67.
FAQ
What is Weighted Moving Average (WMA)?
A moving average where recent prices have higher linear weights.
How do you calculate Weighted Moving Average (WMA)?
A common formula for Weighted Moving Average (WMA) is: WMA = (P1×n + P2×(n-1) + ... + Pn×1) / (n×(n+1)/2)
Why is Weighted Moving Average (WMA) important?
Weighted Moving Average (WMA) helps investors evaluate technical analysis and make more informed decisions.