Weighted Moving Average (WMA)

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Weighted Moving Average (WMA)

Moving averages visualize the average price of a financial instrument over a specified period of time. However, there are a few different types of moving averages. They typically differ in the way that different data points are weighted or given significance. A Weighted Moving Average (WMA) is similar to the simple moving average (SMA), except the WMA adds significance to more recent data points. Each point within the period is assigned a multiplier (largest multiplier for the newest data point and then descends in order) which changes the weight or significance of that particular data point. Then, just like the SMA, once a new data point is added to the beginning, the oldest data point is thrown out.

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