A type of moving average that assigns greater weight to more recent price data points and progressively less weight to older data, making it more responsive to current price changes than a simple moving average. The weighting is applied linearly, with the most recent period receiving the highest multiplier. WMA is used by traders to identify trend direction and generate crossover signals while reducing the lag inherent in simple moving averages.
Example
“The 20-period WMA turned upward and crossed above the 50-period WMA, generating a bullish crossover signal that the trader used to enter a long position.”