MMP: The technical analysis tool that crypto traders should not overlook.

Why Traders Choose Weighted Moving Average

Are you wondering how to better anticipate the movements of Bitcoin and other cryptocurrencies? The answer often lies in technical analysis tools. Among them, the weighted moving average (MMP) stands out by placing greater importance on the most recent data. Unlike a classic average, the WMA prioritizes current prices, allowing traders to capture market signals with more responsiveness.

How it works: a progressive weighting

The principle is simple but powerful. Each price, depending on its position in the considered period, receives a different coefficient. The oldest prices have a low weight, while recent closes are multiplied by high coefficients. To illustrate concretely, let's take an example over five days.

Let's imagine successive closures: $10, $11, $12, $13, and $14. By applying increasing weights (, 2, 3, 4, 5), the calculation breaks down as follows:

• Day 1: 10 × 1 = 10
• Day 2: 11 × 2 = 22
• Day 3: 12 × 3 = 36
• Day 4: 13 × 4 = 52
• Day 5: 14 × 5 = 70

Weighted total: 190. Sum of weights: 15. Result: 190 ÷ 15 = 12.67 $

With each new trading session, the old data drops out of the calculation and the weights automatically readjust, ensuring that your weighted moving average remains in sync with the current price action.

Adjust the period to your strategy

The chosen duration defines your sensitivity to movements. A weighted moving average over ten days remains very reactive, perfect for capturing short-term reversals and volatile spikes. In contrast, a weighted moving average of one hundred days smooths out extreme variations and reveals the underlying general trend of the market.

This flexibility makes it a valuable asset for all trading backgrounds, from aggressive scalping to long-term investing.

Practical Application in Cryptocurrency Trading

Trend Recognition: When the price of Bitcoin crosses its 50-day MMP upward, it can signal the beginning of a bullish momentum, creating a buying opportunity for confident traders. Conversely, if the price falls below this same weighted moving average, a bearish phase emerges, justifying an exit from the position.

Identification of Key Areas: Beyond simple price crossovers, the MMP helps to identify where the cryptocurrency finds support during pullbacks and where it meets resistance during bounces. Observing how prices interact with your weighted moving average shows you precisely where to enter and exit.

To remember

The weighted moving average is much more than just a simple average: it is a living filter that continuously adapts to market conditions. By prioritizing recent data, it offers traders a less noisy view of real trends. Whether you are looking to identify a buy signal, spot a support zone, or simply gain a better understanding of the direction of the crypto market, mastering this technical analysis tool will give you a decisive advantage.