Forex encyclopedia

Random article: What is Weighted Moving Average?

Weighted Moving Average (WMA) is one of the configurations of simple moving average which accounts not only for price values but also their weight. Elements with an account of their values are summed and divided for the sum of weights of those elements, thus, generally speaking, arithmetical average of those elements is calculated. It is accepted that weight changes according to linear function where W1 takes the largest weight and then calculation uses simple arithmetical progression, for instance: 1, 2, 3, 4, 5, 6...; (or any other: 0,5, 0,75, 1, 1,25). Such representation is called Linear Weighted Moving Average, (LWMA).

Popular article: Forex indicators: Force Index

According to A. Elder, 13 periods' Strength Index demonstrates dominating force on the market – bulls or bear - very well. With Force Index (13) above the middle line, bulls rule on the market, whereas FI is below the middle line, bears dominate. With FI dragging near middle line and crossing it a few times, it says about absence of market tendency. New maximum above middle line shows that ascending trend is confirmed. In this respect, a new lowest point below middle line speaks for descending tendency. When with growth or decline of price Force Index (13) starts giving decreasing extreme points – essentially, forming divergence/ convergence – it indicates that current trend loses its significance and a reversal is probable.

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