Fibonacci Weighted Moving Average (FWMA)

Parameters: period = 13 (5–89)

Overview

The Fibonacci Weighted Moving Average (FWMA) represents a unique approach to price smoothing that incorporates the mathematical elegance of the Fibonacci sequence into technical analysis. Unlike traditional weighted moving averages that use linear or exponential weights, FWMA assigns weights based on Fibonacci numbers, creating a natural progression that many traders believe reflects the underlying structure of financial markets. This innovative approach produces a moving average that responds more swiftly to price changes while maintaining the harmonic properties inherent in Fibonacci ratios.

The FWMA works by using the Fibonacci sequence (1, 1, 2, 3, 5, 8, 13, 21, 34, 55, etc.) as weights, with the highest Fibonacci number applied to the most recent price data. For example, in a 10-period FWMA, the current price would be weighted by 55, while the oldest price would be weighted by 1. This creates a dynamic weighting system that emphasizes recent data more heavily than traditional weighted averages, while maintaining mathematical relationships that align with Fibonacci retracement levels commonly used in technical analysis.

Interpretation & Trading Signals

Trend Analysis:

  • Dynamic Support/Resistance: FWMA provides stronger reaction zones than standard MAs
  • Enhanced Responsiveness: Responds more quickly to price changes due to Fibonacci weighting
  • Trend Direction: Rising FWMA indicates uptrend, falling FWMA indicates downtrend
  • Golden Ratio Alignment: Natural harmony with 1.618 ratio found in markets

Trading Signals:

  • Crossover Signals: Price crossing above FWMA suggests buying, below suggests selling
  • Reversal Points: Combine with Fibonacci retracement levels for precision
  • Entry/Exit Points: FWMA touches often mark significant turning points
  • Multiple Timeframes: Use different Fibonacci periods (8, 13, 21, 34, 55) for confluence

Calculation Example (10-period):

  • Fibonacci Weights: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55
  • Sum of Weights: 143
  • Current Price Weight: 55/143 = 38.5% of total
  • Oldest Price Weight: 1/143 = 0.7% of total

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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