Weighted Close Indicator Strategy with Examples

Weighted Close Formula

The Weighted Close indicator is the average of High, Low and doubled Closing price. As the same as in style to Typical Price, Weighted Close is the technical indicator that measures the mean change in a security’s price. Weighted Closed indicator’s main purpose is to filter the Moving Average System.

Weighted Close Indicator FAQ

What does Weighted Close mean?

The Weighted Close indicator generally comes out with an average of each day’s price. The name suggests the fact that extra weight is given to the closing price. The Median Price and Typical Price are almost similar indicators. The result is the average price along with extra weight given to the closing price. This is the exact meaning of weighted close.

How to use Weighted Close Indicator?

This indicator can only provide a clear, concise yet simple picture of the current trend prevailing in the market. In the trade signals of WCI, traders must use other typical trade signal generating techniques like support or resistance, trend lines, and chart patterns, etc. This indicator can also be used to filter moving averages like identifying trends. In WCI must be compared to a moving average.

How to Calculate Weighted Close Indicator?

Weighted Close = ((Closing Price * 2) + High Price + Low Price) / 4.
Where,
Closing Price = The Price of Particular security at the end of a day of the Weighted Close indicator.
High Price = The Highest Price of a Particular Security for the Trading Period under consideration of this indicator.
Low Price = The Minimum Value of a Particular Security for the Trading Period under consideration of Weighted Close indicator.

How to Fit WCI on Charts?

If traders want to know further information about the indicator, then they can go through the STUDIES section of Zerodha Kite. This indicator is also available in Kite mobile App. The Period is 14. If you want to change the value then you can change the value high or low. The attachment process of the indicator to Reliance Industries share price chart is as follows. Charts include various time limits, daily, weekly, monthly or intraday.

Weighted Close Indicator

The specific weighted close indicator is reflecting the average of each day’s price through the line. The name of the indicator itself suggests the features of it, helps to weight the closing price. In simple words, it gives greater weighting to the closing price. The indicator provides an accurate picture of a particular session closing price.

Weighted Close Indicator Examples

What are the Key Points of the WCI?

  • Traders use the weighted indicator, Smooth Line, to Plot a Price Chart. The Line chart of this indicator is very easy to draw and is easy to understand and act as compared to other kinds of charts and patterns.
  • Weighted Close indicator is a typical way to view price data. This gives more importance to the closing price by multiplying the closing price by two in the formula.
  • High and Low are given equal importance to this indicator. You can plot the outcome of this formula of the Weighted Close indicator over a single line chart.
  • A single line chart of this indicator gives a precise and concise picture of the market.
  • Traders frequently use the Weighted Close Indicator as an indicator to determine Primary Trend.
  • Mainly, it cannot be used or should not be utilized as a trade signal generator which is using the Weighted Close indicator to actuate Buy or Sell signals.

How to Use the WC Indicator for Profitable Trade?

High and Low are two extremes that aren’t as important as is the closing price of this indicator. That’s why the Weighted Close indicator multiplies the closing price by two to reduce the impact of irregularities High and Low price. Here, I choose the overlay option. Once the price crosses the WCI above, take a buy signal. Oppositely, crossover below the WCI generates a sell signal.

Weighted close indicator Buy

The next strategy is with the MACD indicator. Here, I add MACD along with WCI. I take buy signal once the price is above WCI and fast MA crosses the slow MA from below. Reversely, in the opposite scenario, sell signal comes.

Stochastic WCI

As we know the divergence occurs when the price and the indicators moves exact the opposite direction. Now, look at the picture below. Here, the 14 periods RSI made higher high when the price made lower lows. In that scenario, the price will move on the direction of the indicator. Just like the picture below. Here, the price and the indicator moved in the opposite direction and later the price followed the indicator’s direction.

Bullish divergence WCI

Advantages of WCI

  • WCI mainly provides a simple yet concise view of the whole day.
  • This indicator applies double weight to Closing Price, which results in a smooth data of the whole trading period.
  • Also, one cannot use WCI to actuate buying and selling yet it can be handy in determining the primary trend.
  • This indicator enhances smoothness in a trading chart. You can use this as a filter for various moving averages including exponential moving average.

Disadvantages of WCI

  • The calculation of WCI counts the figure of Closing Price twice. Also, the Closing Price carries more weight then extreme prices like High or Low Price but can be misleading on some occasions. The indicator doesn’t provide clear trading signals. The maximum of traders prefers other indicators over WCI only because of its lagging nature.
  • In order to generate trade signals of WCI, traders are must use moving averages along with Weighted Close to determine the direction of the future trend.

Conclusion

Weighted Close indicator pays double weight to Closing Price which is the main difference between Closing Price indicator and Weighted Close indicator.

In this Weighted Close uses the double figure of the closing price to bring smoothness and simplicity in the calculation and ultimately eases the procedure of interpreting the outcome which is Average Price of security for one day.

Author: Ankita Sarkar

Ankita is a graduate in English language and she has also done her MBA from the Calcutta University. She has a high knack in the stock markets. She is a NISM certified Research Analyst. An experienced stock market content writer Ankita is also trading successfully on her own account.

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