Double Weighted Moving Average

The Double Weighted Moving Average indicator provides a double-smoothed trend-following line by applying a Weighted Moving Average (WMA) to a previously calculated WMA, offering reduced noise and enhanced trend clarity.

Usage

The Usage section describes how the script can be used, examples should be provided in this section. This section also focuses on how main settings affect the indicator interpretation and output.

The Double Weighted Moving Average (DWMA) is primarily used to identify market trends and potential reversal points. Because it applies two layers of weighting, it reacts more smoothly than a standard WMA while still placing more importance on recent price action compared to a Simple Moving Average (SMA).

• Trend Identification: When the DWMA is rising (often highlighted in green), it indicates a bullish trend. When the DWMA is falling (often highlighted in red), it indicates a bearish trend.
• Crossover Systems: Traders often use the DWMA in conjunction with other moving averages, such as the Jurik Moving Average (JMA), to create crossover signals.
• Support and Resistance: In trending markets, the DWMA can act as a dynamic level where price may find support or resistance.

Details

The DWMA is constructed by taking the Weighted Moving Average of a price source over a specified period and then calculating a second Weighted Moving Average of that result using the same period.

The mathematical logic follows these steps:

1. Calculate $WMA_1 = \text{WMA}(\text{Source}, \text{Length})$
2. Calculate $DWMA = \text{WMA}(WMA_1, \text{Length})$

This double-smoothing process filters out high-frequency market noise more effectively than a single-stage moving average. This specific implementation includes visual toggles to highlight direction changes and built-in alert conditions for when the slope of the average shifts from positive to negative or vice versa.

Settings

• Length: Determines the lookback period for both the initial and the secondary WMA calculations. Higher values result in a smoother line with more lag, while lower values make the indicator more responsive to price changes.
• Highlight Movements ?: A boolean toggle that changes the color of the DWMA plot based on its directional slope. If enabled, the line turns green during upward movements and red during downward movements. If disabled, the line remains a solid color.
• Source: Defines the price data used for the calculation (e.g., Close, Open, High, Low, HL2, etc.).

FAQ

How does the DWMA differ from a standard WMA? The DWMA applies a second layer of smoothing to the initial WMA result. This makes the indicator significantly smoother and less prone to "whipsaws" in choppy markets, though it introduces slightly more lag than a single WMA.

What are the best settings for the DWMA? Settings depend on the timeframe and strategy. A shorter length (e.g., 10-20) is often used for scalping or day trading, while longer lengths (e.g., 50-100) are better suited for identifying long-term structural trends.

How can I access the Double Weighted Moving Average? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.