Weighted Close Study

By Samantha Baltodano

TL;DR:

The Weighted Close indicator is a technical analysis tool that takes the average of the close, high, and low prices, with the close price being given more weight in the calculation. It is used to smooth out irregularities in price data and identify trends. It is not used on its own to provide trading signals.

What Is Weighted Close Study?

The Weighted Close indicator takes the average between the close, high, and low prices. However, in the calculation, the Close price is doubled in the numerator which gives the value more weight. 

The Weighted Close study smooths out irregularities of the price data taking into account Highs and Lows along with the Close prices.

The study contains a secondary plot which is a Simple Moving Average of the Weighted Close.

Formula

The Weighted Close indicator includes the close price twice in the numerator and adds this value to the high and the low price. The total is then averaged (i.e., divided by 4).

Weighted Close = [(Close * 2) + High + Low] / 4

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 studies are almost similar indicators. 

The result is the average price along with extra weight given to the closing price.

How to Use the Weighted Close Indicator?

This indicator can only provide a concise and simple picture of the current market trend. 

In the trade signals of Weighted Close indicator, 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.

Summary

• The Weighted Close indicator is a technical analysis tool that takes the average of the close, high, and low prices, with the close price being given more weight in the calculation
• It is used to smooth out irregularities in price data and identify trends
• Traders can use it in conjunction with other trade signal generating techniques, such as support and resistance levels, trend lines, and chart patterns

Weighted Close is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.

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