WMA 20 50 Proximity Crossover (Trend)
Anticipates the 20/50 weighted-average crossover: buys when the fast average rises to within 0.5% of the slow one from below, and sells when it falls back to within 0.5% from above.
How It Works
- Compute the 20- and 50-bar weighted moving averages and their relative gap, (WMA20 − WMA50) / WMA50.
- Buy when the gap, rising from below, comes within 0.5% of zero — the fast average is about to overtake the slow one, so this acts one step before the actual crossover.
- Sell when the gap, falling from above, drops back within 0.5% of zero — exiting just before the bearish cross completes.
Worked example. WMA50 is 100 and WMA20 has climbed from 99.2 to 99.6 — the gap improved from −0.8% to −0.4%, inside the 0.5% band — buy ahead of the likely cross. Later, with the gap shrinking from +0.9% to +0.4%, the strategy sells before the cross down completes.
The Math Behind The Indicators
Everything runs on closing prices of the traded timeframe: P is a close, Pt today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.
- Weighted Moving Average (WMA)
- A moving average where newer prices count more: the latest close gets weight N, the one before N − 1, down to weight 1 for the oldest. That makes it react to a turn in price sooner than a plain average.
- \[\mathrm{WMA}_N = \dfrac{N \cdot P_t + (N-1) \cdot P_{t-1} + \cdots + 1 \cdot P_{t-N+1}}{N + (N-1) + \cdots + 1}\]
- Example: With N = 3 and closes 100, 102, 104 (oldest to newest): (1·100 + 2·102 + 3·104) / (1 + 2 + 3) = 616 / 6 ≈ 102.67 — pulled closer to the latest price than the plain average of 102.