An introduction to the differences between weighted moving average and simple moving average in technical analysis.

Posted in BVI | EN | Labs | Technical analysis
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Unlocking simple technical analysis by understanding the key differences between simple moving averages (SMA) and weighted moving average (WMA) in financial analysis.

Weighted Moving Average (WMA) and Simple Moving Average (SMA)

Simple Moving Average=(Closing price 5 days ago + Closing price 4 days ago + Closing price 3 days ago + Closing price 2 days ago + Closing price 1 day ago) ÷ 5
Weighted Moving Average=(Closing price 5 days ago × 1 + Closing price 4 days ago × 2 + Closing price 3 days ago × 3 + Closing price 2 days ago × 4 + Closing price 1 day ago × 5) ÷ 15

Increased responsiveness and sensitivity to price changes

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Figure 1: WMA vs. SMA 5WMA(Red) 75WMA(Pink) 5SMA(Blue) 75SMA(Light blue) Source: TradingView

EMA includes past data in its calculation

Frequently asked questions

What are the features of the Simple Moving Average (SMA)?