Weighted Moving Average

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A weighted moving average is designed to put more weight on recent data and less weight on past data. A weighted moving average is calculated by multiplying each of the previous day's data by a weight. The following table shows the calculation of a 5-day weighted moving average.

Table
5-day Weighted moving average
Day # Weight
Price Weighted



Average
1 1 * 25.00 = 25.00



2 2 * 26.00 = 52.00



3 3 * 28.00 = 84.00



4 4 * 25.00 = 100.00



5 5 * 29.00 = 145.00



Totals: 15 * 133.00 = 406.00 / 15 = 27.067

The weight is based on the number of days in the moving average. In the above example, the weight on the first day is 1.0 while the value on the most recent day is 5.0. This gives five times more weight to today's price than the price five days ago.

The following chart displays 25-day moving averages using the simple, exponential, weighted, triangular, and variable methods of calculation.




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