Weighted Close

Understanding 'Weighted Close'

Enter the world of trading and you'll encounter various intriguing concepts. One such concept is 'Weighted Close'. The term sounds complicated but do not worry, we'll break it down simply for you.

Definition of Weighted Close

Weighted Close is a mean calculation that is more focused on the closing price of an asset. It's a type of calculation utilized in technical analysis, aiming to predict future price behaviour. This calculation uses the high, low, and twice the close price in its formula.

How Does Weighted Close Work in Trading?

Within trading, Weighted Close plays a big role. It provides a more precise depiction of an asset's price action, which assists traders in creating their strategies. Traders give more credit to the closing price as it's seen as the most important price of the day. Therefore, in the Weighted Close formula, the closing day price has double the weight.

Calculation of Weighted Close

It's easy to calculate the Weighted Close. You just need to know the high, low, and closing price of the asset for the day. Add these three values together but include double of the closing price. Then, divide the total by four. The formula is: (weighted close = (High + Low + 2 x Close)/4).

The Role of Weighted Close in Technical Analysis

In technical analysis, the Weighted Close could be an important tool. The Weighted Close can be used to create smooth price charts or implementing it into other indicators for trading systems. Since it provides a keen insight into the closing price, it opens doors to multiple strategic decisions.

Conclusion

Understanding the Weighted Close can be a game changer, giving you an edge inside the world of trading. It’s not just a number, but a weighty insight into the asset’s price which can lead you towards smarter trading decisions.