Is the Weighted Moving Average better than the Simple or Exponential Moving Average in
Trading? What is the Weighted Moving Average Trading Strategy, and can we really make money
with it? Well, why don't we understand the WMA and the strategy based around it, and
in the next video, I'm going to test the Weighted Moving Average 100 times to find its win rate.
So subscribe to the Trading Rush channel and ring the notification bell, to see the win
rate of the WMA strategy and many other trading strategies we have tested so far. After all,
you don't want to risk your money on a not-good strategy.
This is what the Weighted Moving Average looks like. If you plot the WMA on its own, you
probably won't see anything different from other moving averages out there. But if you
plot the Weighted Moving Average with the Exponential and Simple Moving Average, you
will notice something. The WMA is used to find the direction of the trend so traders
can look for buying or selling opportunities in the direction of the trend. The Weighted
Moving Average gives more importance to the latest data than the past data. The exponential
moving average also gives more importance to the latest data, but the exponential and
Weighted Moving Averages are calculated differently and will show different values on a chart.
If you have watched the Exponential and Simple Moving Average videos on the Trading Rush
Channel, you already know that the Exponential Moving average is faster than the Simple Moving
Average. But as you can see on this chart, the Weighted Moving Average is even faster
than the Exponential Moving Average in some cases. It will stick close to the candles
and will show the potential trend reversal faster than the other two moving averages.
If the Weighted Moving average reacts to price quickly, does this mean it will give faster and
better entry signals than the Exponential and Simple Moving averages? Well, that depends
on what kind of strategy we create with the Weighted Moving Average.
Since this is a moving average, many traders will look for buying opportunities when the
price is above the Moving Average because it can indicate an uptrend. And if the price
is below the moving average it can indicate a downtrend, and many traders will look for
opportunities to go short.
This is a 200 period weighted moving average, and some traders will immediately buy or close
their short position when the price crosses above the 200 WMA. And traders will create
a new short position or will close their long position when the price crosses below the
200 Weighted Moving Average.
This strategy can be good for long-term investors, but we need something better.
We know that the Weighted Moving Average is faster than the simple moving average, and
most of you know that there is a widely used moving average strategy called the Golden
Cross Trading Strategy. We even tested the Golden Cross Strategy 100 times on the Trading
Rush Channel to find its win rate. The win rate we got after 100 trades was profitable.
Check out the Golden Cross Video to learn more.
In that Golden Cross Video, we used the simple moving average. But instead of using a simple
moving average, what will happen if we use the weighted moving average which is much
faster. Will we get better entry signals? Well, we will find that out in the next video
when we take 100 trades with it.
Here's how the Weighted Moving Average Strategy goes.
When the 50 period Weighted Moving Average, crosses above the 200 period weighted moving
average, it's a buy signal.
Similarly, when the 50 period WMA crosses below the 200 period WMA, it's a sell signal.
In the buy setup, set the stoploss below the 200 period weighted moving average.
And in the short setup, set the stoploss above the 200 period WMA.
Here, you can see that the 50 WMA crossed above the 200 WMA, so entry is when the crossover
happened, and stoploss goes below the 200 WMA.
In this short setup, the 50 WMA crossed below the 200 WMA, so entry is when the Crossover
Happened, and set the stoploss above the 200 WMA.
Now watch this.
This is a long Golden Crossover with the 50 and 200 simple moving averages. As you can
see, the entry signal with the simple moving average is right here.
But if we use the Weighted Moving Averages instead of simple moving averages, you will notice
that the entry signal with the WMA is much earlier.
Here's a short Golden Cross Setup with the simple moving averages. The simple moving
averages gave a golden cross right here.
But on the other hand, the Golden Cross with the WMA was at a much better price.
But does this mean the weighted moving average is better in the long run? Well, in the next
video, we are going to test the Weighted Moving Average Golden Cross Trading Strategy 100
times, to find its win rate, and to see if the Weighted Moving Average can improve the
win rate of the Golden Cross Strategy.
So Subscribe to the Trading Rush Channel and Ring that notification bell to see that, and
to see win rates of other trading strategies we have tested so far, because you don't
want to risk your money on a strategy that doesn't have a good win rate in the first
place. Get trade opportunity signals and see In-depth trade analysis by Supporting Trading
Rush on Patreon. And thanks a lot for watching.