WMA 20

The WMA 20 is a weighted average of the chart's last 20 closing prices, in which the weight rises linearly toward the most recent candle. It follows the price more closely than an SMA or EMA of the same length.

Calculation

$C_t$ is the closing price of candle $t$. The most recent candle gets a weight of 20, the one before it 19 and so on, the oldest gets 1. The sum is divided by the total of the weights, $20 \cdot 21 / 2 = 210$. The most recent candle thus weighs about 9.5%, the oldest 0.5%. The line only starts at the 20th candle. It is calculated on the chart's candles, and the current candle counts with its current price.

What it is used for

• As a short-term trend line for anyone who finds the SMA 20 too slow. The center of gravity of the weights is only a little over 6 candles back for the WMA 20, compared with 9.5 candles for the SMA 20 and EMA 20.
• Unlike with the EMA, a candle drops out entirely after 20 candles. Prices far in the past therefore no longer have any effect.

If you put the WMA 20 next to the EMA 20, you will see that the most recent candle weighs the same in both, but the WMA forgets older prices faster and therefore turns earlier.

Settings

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