Power Weighted Moving Average: Price Weighting by a Power Parameter
Summary
The document defines the power weighted moving average (PWMA), a moving average in which each observation in the selected period receives a weight based on its position raised to a configurable power. It identifies three inputs: the lookback period, the power parameter, and the applied price. The calculation divides the sum of price observations multiplied by their positional weights by the sum of those weights.
The key comparison given is that setting the power to 1 makes the calculation equivalent to a linearly weighted moving average. Changing the power changes how quickly weights grow across the period, allowing the user to alter the emphasis placed on observations at different positions. The note provides a definition rather than a trading system: it does not specify a signal rule, market, parameter selection method, or empirical results. The practical behavior also depends on how the implementation numbers observations within the period and which end of the window receives the largest index, details not stated in the document.
Key ideas
- PWMA weights each applied-price observation according to its position in the lookback period raised to a selected power.
- The indicator takes a period, a power value, and an applied price as inputs.
- With power set to 1, the document says PWMA matches a linearly weighted moving average.
- The note defines an indicator but gives no trading rules or performance evidence.
- Implementation details such as index orientation can affect which observations receive the greatest weights.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.