A Weighted Moving Average puts more weight on recent data and less on past data. This is done by multiplying each bar’s price by a weighting factor. because of its unique calculation.

1. Weighted Moving Average Method
Submitted to:- Dr. kirtan Parmar Submitted by:- Vashu Gupta
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2. Goal:-
Time series
characteristics Time series analysis Moving Average (MA)
Weighted Moving
Average
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3. Introduction:-
• A time series is a set of regular time-ordered observations of a quantitative
characteristic of an individual or collective phenomenon taken at successive
periods.
• WMA will follow prices more closely than a corresponding Simple Moving
Average.
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4. Weighted Moving Average (WMA):-
• A Weighted moving Average puts more weight on recent data and less on
past data. This is done by multiplying each bar’s price by a weighting
factor. because of its unique calculation .
• WMA will follow prices more closely than a corresponding Simple
Moving Average .
• Use the WMA to help determine trend direction.
• It could be an indication to sell when prices rally towards or just above the
WMA.
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5. How this indicator works:-
• Moving average can also indicate support and resistance areas.
• A rising WMA tends to support the price action, This strategy reinforces
the idea of buying when price is near the rising WMA or selling when price
is near the falling WMA.
• WMA are not designed to identify a trade at the exact bottom or top.
• Moving averages tend to validate that your trade, but with a delay at entry
and exit.
• The WMA has a shorter delay then the SMA.
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6. • Use the same rules that apply to SMA when interpreting WMA.keep in mind,
though, that WMA is generally more sensitive to price movement.
• This can be a double edged sword.
• On one side,WMA can identify trends sooner than a SMA.
• On the flip side, the WMA will probable experience more can identify trends
sooner than a SMA.
• On the flip side,the WM will probably experience more whipsaws than a
corresponding SMA.
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7. Calculation :-
The most recent data is more heavily weighted, and contributes more to the final WMA
value.
The Weighting factor used to calculate the WMA is determined by the period selected
for the indicate. for example , a period WMA would be calculated as follows:
WMA=(p1*5)+(p2*4)+(p3*3)+(p4*2)+(P5*1)/(5+4+3+2+1)
Where:
P1=current price
P2=price one bar ago, etc.
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8. Moving Averages:-
• Example:-we will find Four year Moving Average
• First Average: MA(4) =
𝑦1+𝑦2+𝑦3+𝑦4
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• First Second: MA(4) =
𝑦2+𝑦3+𝑦4+𝑦5
4
• First Third: MA(4)=
𝑦3+𝑦3+𝑦4+𝑦6
4
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9. Describe WMA by the help of example:-
• Forecast sales using 4-week weighted moving averages with weights
0.4,0.3,0.2 and 0.1 by the help of Weighted Moving Average.
• Now we get a table whose sales values
given as :
• 39,44,40,45,38,43,39 as week 1,2,3,4
• 5,6,7,8 respectively.
Step1-we want to calculate this problem by the help
Of WMA method.
Now we want to calculate our first four weeks
Average , so multiplying sales with respect to 0.4,0.3,
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Week Sales 4WMA
1 39X0.1
2 44x0.2
3 40x0.3
4 45x0.4
5 38 42.7
6 43
7 39
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10. Calculation:-
0.2,0.1.
Now we have four value then we have to find
sum of these four vales
F5=O.4(45)+0.3(40)+0.2(44)+0.1(39)
42.7
This is called F5.
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Week Sales 4WMA
1 39
2 44x0.1
3 40x0.2
4 45x0.3
5 38 X0.4
6 43
41.1
7 39
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11. step2-Now again multiply sales value
with given weight 0.4,0.3,0.2,0.1 respectively
After multiplying to find the sum of four
values then it is called F6.
F6=0.4x(38)+O.3(45)+0.2(40)+0.1(44)
 =41.1
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Week Sales
4WMA
1 39
2 44
3 40x0.1
4 45x0.2
5 38x0.3
6 43x0.4
7 39 41.6
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12. step3-Now again multiply sales value
with given weight 0.4,0.3,0.2,0.1 respectively
After multiplying to find the sum of four
values then it is called F7.
F7=0.4(43)+.3(30)+0.2(45)+0.1(40)
 =41.6
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Week Sales
4WMA
1 39
2 44
3 40
4 45x0.1
5 38x0.2
6 43x0.3
7 39x0.4
8 40.6

13.  step4-Now again multiply sales value with given weight 0.4,0.3,0.2,0.1 respectively
 After multiplying to find the sum of four values then it is called F6.
 F8=0.4(39)+.3(43)+0.2(38)+0.1(45)
 =40.6
 Now Find the average:
 Step5- Now we will calculate the difference between the previous weight and after.
 So subtract f5,f6,f7 in given sales
F5=>42.7-38=4.7
F6=>41.1-43=1.9
F7=>41.6-39=2.6
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14. Step6-Now we have to find the weighted Moving Average
Using the Formula
 =
4.7+1.9+2.6
3
= 3.07
Therefore, the weighted moving average for the week from 1 to 8 is 3.07.
•
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=
𝑓5+𝑓6+𝑓7
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15. Advantage and Disadvantage :-
Advantage-:
Easily Understood.
Easily Computed.
Provides stable Forecasts.
Disadvantage:-
Requires saving all past and data points.
Lags behind a trend.
Ignores complex relationship in data.
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16. THANK YOU
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