Squared Weighted Moving Average (SQWMA)

Overview

The Squared Weighted Moving Average represents an aggressive approach to price weighting, using squared values instead of linear weights in its calculation. While a standard WMA assigns weights of n, n-1, n-2, etc., the SQWMA uses n², (n-1)², (n-2)², creating an exponential increase in importance for recent prices. For example, in a 5-period SQWMA, the most recent price receives a weight of 25, while the oldest receives only 1, compared to weights of 5 and 1 in a standard WMA. This squared weighting scheme results in a moving average that reacts very quickly to price movements.

The mathematical formula SQWMA = Σ(Pi × i²) / Σ(i²) creates a highly responsive indicator that excels at capturing short-term price momentum. By dramatically emphasizing recent data points, the SQWMA can detect trend changes earlier than most other moving averages. However, this sensitivity comes with increased susceptibility to whipsaws during sideways markets. The indicator works best in strongly trending markets where its quick response time allows traders to enter positions early in new trends while its smoothing properties help filter out minor price fluctuations.

Interpretation & Trading Signals

Example Usage

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