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. Weighted

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

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

    The final price at which a security is traded on a given trading ...
  4. Simple Moving Average - SMA

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

    A type of moving average that is similar to a simple moving average, ...
  6. Fintech

    Fintech is a portmanteau of financial technology that describes ...
RELATED FAQS
  1. How are moving averages used in trading?

    Moving averages are very popular tools used by technical traders to measure momentum. The main purpose of these averages ... Read Full Answer >>
  2. What technical tools can I use to measure momentum?

    One of the main goals of every trader using technical analysis is to measure the strength of an asset's momentum and the ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Simple Moving Averages Make Trends Stand Out

    The moving average is easy to calculate and, once plotted on a chart, is a powerful visual trend-spotting tool.
  2. 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.
  3. Trading Strategies

    How to Do the Fundamental And Technical Combo Trade

    Fundamental and technical analyses should be viewed as complementary rather than competing practices. When combined, these two methods can greatly strengthen your game.
  4. Stock Analysis

    A Trader's Look at the S&P 500

    Moving averages are sending an important signal, and it's probably not what you think.
  5. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  6. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...
  7. Trading Strategies

    The Top Five Stocks For Novice Swing Traders

    New to Swing Trading? Here are the top five stocks recommended for swing trading.
  8. Chart Advisor

    These ETFs are Breaking Out of Chart Patterns Now

    Three buys and one sell; here are four ETFs breaking out of chart patterns right now.
  9. Trading Strategies

    Capitalize On Collars To Enhance Your Trades

    Trade collaring measures current technicals and makes swift adjustments to account for environmental changes.
  10. Trading Strategies

    Look At The Whole Picture To Manage Whipsaws

    Look at past action to organize a whipsaw’s volatile characteristics, identifying harmonic levels that may offer low risk entry prices.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center