What is Weighted Moving Average Envelope

A Moving Average gives an arithmetic weighting to values, with the newest having the more weight. The indicator provides WMA and envelope bands separated “perc” from it.

Weighted Moving Average Envelope Indicator

The Weighted Moving Average Envelope is a momentum indicator used to identify price trends over a period of time. Moving-average envelopes offer a valuable tool for spotting trends after they develop. More precise tools help identify high-probability turning points in short-term trends. 

How To Calculate Weighted Moving Average Envelope

Formula:- WMA = Weighted Moving Average

top = wma * (100 + perc)/100

bot = wma * (100 – perc)/100

Why Use Weighted Moving Average Envelope

While Moving Averages (MA) are a popular trading tool, they often give false signals in a market where prices are swinging up and down frequently. But traders add an envelope to the moving average to eradicate some of these false signals and creating a reliable indicator. Analysts have been using envelopes for trading for years now, and using this with MA can be extremely helpful.

How to Use Weighted Moving Average Envelope Trading Strategy

Bullish Scenario:- The bullish scenario is similar to the WMA, except an envelope set is added, and we get to choose from it and compare accordingly. 

Bearish Scenario:- The bearish scenario is similar to the WMA, except an envelope set is added, and we get to choose from it and compare accordingly. 

Building Weighted Moving Average Envelope Trading Strategy in Mudrex

Strategy:- 

BUY:- WMAE Top(12 days) crosses up WMAE TOP(30 days)

SELL:- WMAE BOTTOM(12 days) crosses down WMAE BOTTOM(30 days)

TIME FRAME:- 4Hrs

Creating on Mudrex:- 

We will use 2 WMAE compare blocks—one for selling and one for buying.

For buying, we will use the following settings:-

For selling, we will use the following settings:-

Final Strategy:-

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 105.76%

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