Increase your profitability ratio with Weighted Moving Average on Deriv

Moving Average is one of the most compulsory chapters in the field of trading and therefore, It is very much important for traders to learn and understand this indicator properly. In this article, I am going to discuss one of the most important family members of moving averages name Weighted moving average.

Weighted moving average Basics

WMA (Weighted moving average) is a technical analysis tool used by traders to smooth out the price data over a specific period. similar to other moving averages. This indicator is considered much more powerful than other moving averages as it assigns more weight to the most recent price data. The weight assigned to the price data reminds the level of importance the most recent price data point is assigned the highest weight and the weight decreases gradually for the past price data.

How to calculate the weighted moving average?

As said above, In weighted moving average you need to assign data points. the most recent price data will have greater points while the oldest one will have the least points. This helps the weighted moving average indicator to find the most accurate trading signals for the traders.

Suppose you want to calculate 5 periods weighted moving average for a security price where

Day 1 Price = 10

Day 2 = 20

Day 3 = 25

Day 4= 30

Day 5 ( current price) = 35

Here, the sum would be = 1 + 2 + 3 + 4 +5 =15

And the five-day wma would be = 10 * (1/15) + 20 * (1/15) + 25 * (1/15) + 30 * (1/15) + 35 * (1/15) =8

How to add WMA on the Deriv chart?

 

How to add WMA on the Deriv chart?

Firstly log in to your Deriv account. In case, you don’t have one you will get access a direct to free account where you will get a $10, 000 virtual currency account. Once you have signed up, you will land on the Deriv trading dashboard. now, click on the chart button and set your default chart to candlestick. Next, click on the currency button and select your desired currency. Now, click on the indicator button and search for moving average and click the name. Lastly, set the type as WMA and make the necessary amendments such as change in period and colour of the indicator line. you can even darken the line for better visibility.

How to trade with a weighted moving average on the Deriv chart?

You can easily trade with a weighted moving average on the Deriv chart there are multiple ways of trading with the indicator, however, the most popular ones are

 

How to trade with a weighted moving average on the Deriv chart?

 

Single WMA: Here, You need to look for the crossover of the price and the indicator line. when the price intersects above the indicator line it signals a bullish trend vice versa, when the price intersects below the indicator line it signals a bearish trend. with a bullish trend, you need to place a buy trade and vice versa with a bearish trend you need to place a sell trade.

 

 

Dual WMA: You can even use two WMAs where you need to focus on the intersection of these two lines. when the fast line interests above the slow line it signals a bullish trend and vice versa when the slow line intersects above the fast line it signals a bearish trend.

For Instance, Let’s use two WMA line with periods 12 and 25. when line 12 (Green line) intersects above the line 25 (Red line) it signals a bullish trend and conversely,  when line 12 crosses below line 25 it signals a bearish trend.