What WMA Really Measures

The Weighted Moving Average (WMA) measures the average price of an asset over a specified period, but with a critical distinction: it assigns greater weight to more recent price data. Unlike the Simple Moving Average (SMA), which treats all periods equally, the WMA emphasizes recent market behavior by applying descending weights to older data points.

This design makes the WMA more responsive to recent price changes, offering a clearer reflection of current momentum and trend direction. It helps traders identify whether the market is gaining or losing strength by focusing on the most recent activity.

In trending markets, the WMA acts as a dynamic support or resistance level. When prices are above the WMA, it signals bullish momentum, and when below, it indicates bearish sentiment. Because of its sensitivity to new data, the WMA reduces lag, providing earlier signals than the SMA. However, this responsiveness can also lead to more false signals in choppy or sideways markets.

By measuring weighted average price movement, the WMA offers a nuanced view of trend strength—not just trend direction. A steeply rising WMA suggests strong buying pressure, while a flattening WMA indicates weakening momentum. This makes WMA an effective tool for spotting trend reversals and confirming trend continuation in real-time.

In crypto markets, where volatility and rapid shifts are common, WMA helps traders align with trend dynamics that matter most: recent price behavior.