Technical Glossary / Technical Indicators – Trend Indicators
Weighted Moving Average (WMA)
A moving average that gives linearly more weight to more recent closes, and zero weight beyond the window.
Formula
Weight the oldest close by 1, the next by 2, up to the newest by N. WMA = sum(weight x close) / sum(weights). Sum of weights is N x (N + 1) / 2.
Definition
The weighted moving average sits between the SMA and the EMA in spirit. Recent closes count more, and closes older than N are gone completely. The weights are a straight line, not an exponential decay. When the oldest bar drops out, it only had weight 1, so the line does not jump the way an SMA can.
How it works
A 10-period WMA gives today about 18 percent of the weight and the oldest day about 2 percent. The same length SMA gives every day 10 percent. WMA therefore turns faster than SMA and slower, typically, than a short EMA, depending on settings.
How traders use it
Use it when you want recency without the EMA's infinite tail. It is a fine trend filter. It does not become a different kind of signal just because the weights are linear.
Common mistakes
Assuming WMA, EMA, and Hull are interchangeable in a written system. The cross dates will differ. Name the average you tested.
Limitations
Linear weights are a choice, not a discovered law of markets. A different scheme fits a different sample. Keep the length stable.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.