A Weighted Moving Average placesmore weight on recent values and less weight on older values. A Moving Averageis most often used to average values for a smoother representation of theunderlying price or indicator. A weighted moving average is designed to putmore weight on recent data and less weight on past data. A weighted movingaverage is calculated by multiplying each of the previous periods data by aweight. The weighting is calculated from the sum of period. First, theexponentially smoothed average assigns a greater weight to the more recent data.Therefore, it is a weighted moving average. But while it assigns lesserimportance to past price data, it does include in its calculation all the datain the life of the instrument.
If larger weight factors are usedfor more recent periods and smaller factors for measurements further back intime, the trend will be more responsive to recent changes without sacrificingthe smoothing a moving average provides Weighted Moving Average smoothes a dataseries that is very important in a volatile market
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