WMA 20 50 Short Crossover (Trend)
The short side of the 20/50 crossover: sells short when the 20-bar weighted moving average crosses below the 50-bar and covers when it crosses back above.
How It Works
- Compute the 20- and 50-bar weighted moving averages — the same pair as the long crossover, traded from the other side.
- Sell short when the fast WMA crosses below the slow one: borrowing and selling now to buy back cheaper if price keeps falling.
- Buy back (cover) when the fast WMA crosses above the slow one again.
Worked example. WMA20 drops through WMA50 at a price of 100, so the strategy sells short. Price drifts down to 92 before the fast average turns back above the slow one, where the short is bought back for an 8% gain.
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.
- 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.