Weighted Moving Average (WMA)

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This is another kind of Moving average in Technical analysis, this moving average gives more weight (importance) to recent periods compared to past periods of time.

Why should I use it?

The Simple Moving Average (SMA) which is a basic tool in Technical Analysis will apply the same importance to every period of time when it calculates the average price. This is why it is called "simple" average. If you have a SMA of 14 periods on your chart, it will consider the price action of 14 bars ago to be just as important as the current bar in the market.
The Weighted Moving average however, will apply more importance to the current time bar in comparison to past bars.
In this way the WMA can represent an average price that is stressing out the recent price activity, making it more responsive to current price changes, while still taking past performance into account.

How does it look like?

The WMA looks just like a Simple Moving average, that is, a single line on the chart which indicates average price for each period.

How does it work?

Anything that you can do with a simple moving average, you can apply to the Weighted Moving Average.
A Moving average is basically used to define the market direction, to spot possible support and resistance levels and a possible change in the market's trend.
(Notice that the exponential moving average is also considered a weighted moving average, only it applies weight exponentially as we move from one period to another, this is why we call it an exponential moving average, while the WMA is weighting the first period 1, and thereafter adding +1 to every next bar. . For example if it is a 9 period WMA, the first bar will be weighted 1, the second 2, the third 3 and so on until the current bar 9).

Example

This is an example of how you can spot a change in the market's direction using a WMA. Below is a CAD/JPY chart with a WMA. At first the market is trading under the WMA in a down trend, then the price breaks above the WMA indicating a change in the direction of the trend.

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Welles Wilder Smoothing

This is another Moving average, which is very similar to an Exponential Moving Average (EMA), but uses only a slightly different calculation.

Why should I use it?

The Welles Wilder Smoothing indicator reacts slower to the changes of the price in comparison with the Exponential moving average. It gives you the qualities of an Exponential moving average, with some what reduced sensitivity to price changes.
Because it is less sensitive, it might avoid potentially false signals the Exponential Moving average wouldn't.

How does it look like?

The Welles Wilder Smoothing looks just like a Simple Moving Average, that is, a single line on the chart that indicates the average price for each period.
Choose its color and number of periods you want to use for its calculation out of the indicator settings box.

How does it work?

Anything that you can do with a simple moving average, you can apply to the Welles Wilder Smoothing line.
Use it to define the market direction, to spot possible support and resistance levels and a possible change in the market's trend.

Example

Below is an hourly chart of EUR/USD with a 21 period Welles Wilder Smoothing line.
In this example the trader believes the uptrend is going to continue and will use the Welles Wilde Smoothing to find a good entry for his long (buy) trades. Notice how the Wilder line is serving as a support line to the price, signaling buy entries when the market is temporarily correcting to the downside towards the line.

Variable Moving Average (VMA)

This is an exponential moving average, which can automatically adjust itself to the volatility of the market.

Why should I use it?

A moving average is a major tool in Technical Analysis; however, since it is after all an average calculated from past data, it has sometimes difficulty to apply its qualities when the conditions in the market change the degree of volatility.
The Variable Moving Average is able to detect and adjust its smoothness together with the change in the volatility of the market.
Therefore, it can perform better in ranging periods and highly volatile periods, when typical moving averages readings become less accurate.
Remember that there are a lot of factors that can increase or lower the degree of volatility in the market, for instance an important news event at a specific date and time can create high volatility, while late at night (GMT time) volatility can be very low.

How does it look like?

The VMA looks just like a Simple Moving Average, that is, a single line on the chart which indicates an average price for each period.

How does it work?

The more volatile the market is, the more smoothing is used for the calculation and the greater the weight is given to the current data. This means that in periods of high volatility the VMA will get more sensitive compared to periods of low volatility - allowing the Variable Moving Average to respond quicker when needed, or slower when needed.

Example

Below is a daily USD/JPY chart with two moving average lines, an exponential moving average (red) and the Variable Moving Average (blue). Notice how the VMA is quicker to respond to periods of high volatility in comparison to the EMA, see for instance the very volatile down move around Oct 24.

Triangular Moving Average (TMA)

A Triangular Moving Average is also considered as a weighted moving average, only if the weighed moving average applies more weights to the more recent time bars, the Triangular Moving Average will apply the majority of its weight to the center of the time range.

Why should I use it?

Traders who use the Triangular Moving Average assume that the most important period for price average calculation is the middle period. For instance, if you open a 14 period TMA, the 7th bar and the 8th bar would be considered the most important, and the TMA will apply the highest weight to these bars.
Use the TMA if you believe the middle bars of the time range are the most important for a better representation of a moving average line.
This is in contrast to a Simple moving average which regards every bar as equal, or an Exponential and Weighted moving averages which apply most of the weight to the last bars on your chart.

How does it look like?

The TMA looks just like a Simple Moving Average, a single line on the chart which indicates an average price for each period.

How does it work?

Anything that you can do with a simple moving average, you can apply to the Triangular Moving Average
It can define the market direction, spot possible support and resistance levels or a possible change in the market's trend.

Example

Below, the Triangular Moving Average is becoming steeper and steeper as it moves up. The price is trading mostly above the TMA, this indicates the market is in a strong uptrend.

Trend Lines

A corner stone in Technical analysis, Trend Lines are the main way traders use to define trends- their beginnings and their endings.

Why should I use it?

Many traders claim that simplicity is the only right approach to trading.
This is what Trend Lines are all about -simplicity! no averages, deviations or complicated calculations, just a straight clear lines running through the chart and defining the current trend.
Even if simple, a trend line can tell a lot about the market - when it is trending, where can you expect possible support and resistance level, and when a trend is potentially changing its direction.
Properly drawn trend lines have place in any serious Technical analysis you may perform in your trading.

How does it look like?

An uptrend (also called a bullish trend) is drawn under the price and is the meeting point of "higher lows" the market had since the beginning of the uptrend.
A downtrend (also called a bearish trend) is drawn above the price and is the meeting point of "lower highs" the market had since the beginning of the downtrend.

How does it work?

When the market is making a low, and then a higher low, you can draw a line connecting those two lows- this line would be a bullish trend line. Drawing it defines the current trend as an uptrend. The line it-self is serving as support to the price which is trading above it. If the price penetrates the trend line, a change in direction might be on the way.
When the market is making a high, and then a lower high, you can draw a line connection the two highs- this would be a bearish trend line. Drawing it defines the current trend as a downtrend. The line itself is serving as resistance to the price which is trading under it. If the price penetrates above the trend line, a change in direction might be on the way.

Example

Above, an example of how you should draw an uptrend line using a low, and then the next higher low. Notice how the trend line serves as support to the price whenever it is back to touch the trend line. A clear break under it will signal a possible change in trend.

This is an example of how you should draw a downtrend line, drawing a line between the highest high, and a lowest high which follows.