What is WMA (Weighted Moving Average)? How It Differs from SMA and EMA
A Weighted Moving Average assigns different weights to each price with the most recent getting the highest weight. Unlike EMA's exponential decay, WMA uses linear weighting where weights decrease by a fixed amount for each older day.
In a 5-day WMA, today gets weight 5, yesterday 4, two days ago 3, three days ago 2, four days ago 1. Total weight is 15. WMA is the weighted sum divided by 15. Today's price has five times more influence than four days ago.
How does WMA compare to SMA and EMA?
SMA: equal weight. EMA: exponential weighting (recent prices get exponentially more weight). WMA: linear weighting (each day gets one unit less). In responsiveness: EMA fastest, WMA middle, SMA slowest. Practical differences are usually small.
When would you use WMA?
WMA is less common than SMA or EMA. Some traders prefer it for short-period calculations where linear weighting creates a smoother curve. In practice, the choice between EMA and WMA makes minimal difference. SMA and EMA are far more widely used in Indian markets.
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Frequently Asked Questions
Is WMA available on Indian broker platforms?
Most charting platforms support WMA under moving average settings where you choose type: Simple, Exponential, or Weighted.
Can WMA and EMA give conflicting signals?
Rarely. Both prioritise recent prices and move very similarly. Differences are marginal. Go with whichever your backtesting shows better results.
What WMA periods are commonly used?
Same as SMA and EMA: 20, 50, 200 days. No widely followed WMA-specific strategy exists. Traders apply it with the same rules they use for EMA.
Is WMA better for intraday trading?
No strong evidence. EMA remains the most popular intraday MA. If you are comfortable with EMA, switching to WMA is unlikely to improve results.
Why is WMA less popular despite being similar?
EMA was popularised by MACD (which uses EMAs). WMA has no famous indicator built on it. In practice, the choice is personal preference rather than significant performance difference.
Disclaimer: Investments in the securities market are subject to market risks. Please read all related documents carefully before investing. This article is intended for informational and knowledge purposes only and should not be considered tax, financial, or investment advice. Tax laws and deductions may vary based on individual circumstances and regulatory changes. Readers are advised to consult a qualified tax advisor or financial professional before making any investment or tax planning decisions.
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