Weighted Moving Average
WMA · module 03 of 33 · trend
A linearly weighted average: the most recent close carries weight n, the oldest weight 1.
- WMA 20
- SMA 20 (compare)
- ▲/▼ where the rule triggers
The WMA hugs price more tightly than an SMA of the same length. Closes across it flag momentum changes.
How to apply it
- 1. Add it. Start with 10 on 1m/5m (Scalping).
- 2. Read the market first. Tracks a trend more closely than an SMA and slightly differently from an EMA, dropping old data entirely at the window edge.
- 3. Adjust for ranges. Whipsaws like every other moving average; the faster weighting makes it worse, not better.
- 4. Manage the trade. Place the stop at 1.5 × ATR and the target at 3.5 × ATR, and only act when the chart above shows the trigger.
How it is calculated
WMA(n) = Σ(Cᵢ × wᵢ) ÷ Σwᵢ, with weights 1…n applied oldest to newest.
Inputs
- · Period (n)
- · Price source
Reading it correctly
In a trend
Tracks a trend more closely than an SMA and slightly differently from an EMA, dropping old data entirely at the window edge.
In a range
Whipsaws like every other moving average; the faster weighting makes it worse, not better.
Settings by style
| Style | Suggested values |
|---|---|
| Scalping | 10 on 1m/5m |
| Intraday | 20 on 15m |
These are conventional starting points, not optimised values. Test any change on your own pair and timeframe before relying on it.
Worked example
Closes 1.0850, 1.0860, 1.0870 with weights 1, 2, 3: (1.0850×1 + 1.0860×2 + 1.0870×3) ÷ 6 = 6.5210/6 = 1.08637. The SMA of the same three closes is 1.0860 — the WMA sits closer to the latest close.
When it failed
Used as the only trend filter on 1m USD/JPY, the WMA(10) changed slope 14 times in one Asian session, generating a signal on each change while price finished the session 6 pips from where it started.
Limitations
- No practical advantage over the EMA for most rule sets; adds a parameter without adding information.
- Faster response means more false turns in ranges.
- Fully drops the candle leaving the window, which can cause a small jump.
Works well alongside
- · ADX / DMI
- · ATR
Redundant with
- · SMA
- · EMA
- · KAMA
Stacking these produces agreement by construction, which is not confirmation.
Practice exercise
Plot SMA(20), EMA(20) and WMA(20) together on 1h GBP/USD. Note how often the three disagree about slope direction, and whether any disagreement preceded a useful move.
Check your understanding
1. How do WMA weights work?
- · All candles weighted equally
- ✓ Weights increase linearly toward the most recent candle
- · Weights decay exponentially forever
- · Weights are based on volume
The oldest candle in the window gets weight 1 and the newest gets weight n, with linear steps in between.
2. Running SMA, EMA and WMA of the same period together mainly:
- · Confirms the signal three times
- ✓ Produces correlated lines that agree by construction
- · Removes lag
- · Improves accuracy in ranges
All three are averages of the same closes, so agreement is mathematically expected and is not independent confirmation.