Weighted Moving Averages
by Thomas Hutchinson and Peter G. Zhang, PhD.
The moving average is well known and much used in the field of technical analysis, but it also has a
flaw: its lack of flexibility. But it need not be fatal. First-time STOCKS & COMMODITIES contributors
Thomas Hutchinson and Peter Zhang of MMS International present variations of moving averages to
combat the lack of flexibility in simple moving averages and linearly weighted moving averages by
introducing the general weighted moving average (GWMA).
Moving averages are used in most forms of technical analysis to forecast trends and to smooth data.
Of these, the most widely used and best known is the simple moving average (SMA), which is the
arithmetic mean or average of a series of prices over a period of time.
To take an example, let the lookback period be, say, five. Sum the last five periods and divide the result
by five. For example, a five-period simple moving average of the Standard & Poor's 500 would be: