The Rate-of-Change indicators were then smoothed with a weighted moving average. As its name implies, a weighted moving average puts more weight on recent data and less weight on older data. For example, a 3-period WMA would multiply the first data point by 1, the second data point by 2 and the third data point by 3. The sum of these three numbers is then divided by 6, which is the sum of the weightings (1 2 3), to create a weighted average. The table below shows a calculation from an excel spreadsheet.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.