Linearly Weighted Moving Average

DEFINITION of 'Linearly Weighted Moving Average'

A type of moving average that assigns a higher weighting to recent price data than does the common simple moving average. This average is calculated by taking each of the closing prices over a given time period and multiplying them by its certain position in the data series. Once the position of the time periods have been accounted for they are summed together and divided by the sum of the number of time periods.

BREAKING DOWN 'Linearly Weighted Moving Average'

For example, in a 15-day linearly-weighted moving average, today's closing price is multiplied by 15, yesterday's by 14, and so on until day 1 in the period's range is reached. These results are then added together and divided by the sum of the multipliers (15 + 14 + 13 + ... + 3 + 2 + 1 = 120).

The linearly weighted moving average was one of the first responses to placing a greater importance on recent data. The popularity of this moving average has been diminished by the exponential moving average, but none the less it still proves to be very useful.

RELATED TERMS
  1. Simple Moving Average - SMA

    A simple, or arithmetic, moving average that is calculated by ...
  2. Exponential Moving Average - EMA

    A type of moving average that is similar to a simple moving average, ...
  3. Average Return

    The simple mathematical average of a series of returns generated ...
  4. Weighted Average

    An average in which each quantity to be averaged is assigned ...
  5. Golden Cross

    A crossover involving a security's short-term moving average ...
  6. Weighted

    A mathematical process by which figures and/or components are ...
Related Articles
  1. Trading Strategies

    Technical Analysis: Moving Averages

    By Cory Janssen, Chad Langager and Casey MurphyMost chart patterns show a lot of variation in price movement. This can make it difficult for traders to get an idea of a security's overall trend. ...
  2. Forex

    Moving Averages

    The use of moving averages in technical analysis
  3. Active Trading Fundamentals

    Weighted Moving Averages: The Basics

    We take a closer look at the linearly weighted moving average and the exponentially smoothed moving average.
  4. Active Trading

    Moving Averages: What Are They?

    By Casey Murphy, Senior Analyst ChartAdvisor.com Among the most popular technical indicators, moving averages are used to gauge the direction of the current trend. Every type of moving average ...
  5. Technical Indicators

    How To Use A Moving Average To Buy Stocks

    The Moving Average indicator is one of the most useful tools to trade and analyze financial markets.
  6. Active Trading

    Moving Averages: How To Use Them

    By Casey Murphy, Senior Analyst ChartAdvisor.com Some of the primary functions of a moving average are to identify trends and reversals, measure the strength of an asset's momentum and determine ...
  7. Active Trading

    Moving Averages: Conclusion

    By Casey Murphy, Senior Analyst ChartAdvisor.com In this tutorial, we've covered the basics of moving averages. Here's a brief recap: Few technical indicators are as popular and widely followed ...
  8. Active Trading

    Moving Averages: Factors To Consider

    By Casey Murphy, Senior Analyst ChartAdvisor.com Data Used in Calculation Most moving averages take the closing prices of a given asset and factor them into the calculation. We thought it would ...
  9. Technical Indicators

    Use Moving Averages to Buy Stocks

    A moving average constantly updates a stock's average price, but it cannot predict a stock's performance.
  10. Mutual Funds & ETFs

    Using Moving Averages to Buy ETFs

    Learn how to use moving averages to enter and exit trades in ETFs, and understand some popular technical setups using moving averages.
RELATED FAQS
  1. Are exponential moving averages more effective than simple or weighted moving averages?

    Learn about different types of moving averages, as well as moving average crossovers, and understand how they are used in ... Read Answer >>
  2. What is the difference between a simple moving average and an exponential moving ...

    The only difference between these two types of moving average is the sensitivity each one shows to changes in the data used ... Read Answer >>
  3. What are the main advantages of using Moving Averages (MA)?

    See why moving averages have proven to be advantageous for traders and analysts and useful when applied to price charts and ... Read Answer >>
  4. What is the difference between Exponential Moving Average (EMA) and Weighted Moving ...

    Read about the difference between exponential moving averages and weighted moving averages, two smoothing indicators that ... Read Answer >>
  5. What is the difference between a simple moving and an exponential moving average?

    Learn about simple moving averages and exponential moving averages, what these technical indicators measure and the difference ... Read Answer >>
  6. I keep hearing about the 50-day, 100-day and 200-day moving averages. What do they ...

    Whether you are using the 50-day, 100-day or 200-day moving average, the method of calculation and the manner in which the ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center