Question

An advantage of a weighted moving average is that recent actual results can be given more importance than what occurred a while ago. True or false?.

Answer 1

An advantage of a weighted moving average (WMA) is that recent actual results can be given more importance than what occurred a while ago is a "true" statement because "Weighted moving averages could be adjusted to emphasize more recent data in forecasting."

What is moving average?

Moving averages are popular tools for measuring momentum among active traders. The formula used to calculate the average is the primary distinction between a simple moving average, a weighted moving average, and an exponential moving average.

Some key features regarding the weighted moving average are-

• The SMA calculates the average price above a specific time period, whereas the WMA emphasizes current data.
• The exponential moving average (EMA) is also weighted to reflect the most recent prices, however the rate of decrease among one price and its previous price is not constant but exponential.
• Weighted moving averages give more weight to recent data points as they're more relevant than data points from the distant past.
• The total of the weightings should equal 1 (or 100%).
• The weightings are distributed equally in the case of the simple moving average.

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