Linearly Weighted Moving Average

AAA

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.

INVESTOPEDIA EXPLAINS '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. Exponential Moving Average - EMA

    A type of moving average that is similar to a simple moving average, ...
  2. Simple Moving Average - SMA

    A simple, or arithmetic, moving average that is calculated by ...
  3. Weighted

    A mathematical process by which figures and/or components are ...
  4. Weighted Average

    An average in which each quantity to be averaged is assigned ...
  5. Closing Price

    The final price at which a security is traded on a given trading ...
  6. Mass Index

    A form of technical analysis that looks at the range between ...
Related Articles
  1. Simple Moving Averages Make Trends Stand ...
    Active Trading Fundamentals

    Simple Moving Averages Make Trends Stand ...

  2. Weighted Moving Averages: The Basics
    Active Trading Fundamentals

    Weighted Moving Averages: The Basics

  3. What technical tools can I use to measure ...
    Trading Strategies

    What technical tools can I use to measure ...

  4. How are moving averages used in trading?
    Active Trading Fundamentals

    How are moving averages used in trading?

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center