Forex professionals can get really stressed with market records and trading strategies. To be successful in forex trading, you need to recognize and avoid all the market noise and be able to identify the trend of prices. It is possible to eliminate market noise by using a technical forex indicators that identify the beginning and closing point of a trend. Fx traders use moving averages to clean out the market volatility.
Wilder’s Smoothing indicator was developed by Welles Wilder and mentioned in his publication ”New Concepts in Technical Trading”. Wilder used the Smoothing indicator as component in a couple of his other indicators such as the RSI. Wilder’s Smoothing indicator can be used in the same capacity as any other moving averages.
WSMA Indicator Formula
- Calculate a simple moving average (SMA).
- Add the previous day’s Wilder Smoothing Value to difference between the close and the previous day’s smoothing value divided by the period.
Smoothing today = smoothing previous + (today’s close – previous day’s smoothing value) / period
Wilder’s Smoothing Moving Average Signals
Wilder’s Smoothing Moving Average (WSMA) is comparable to the EMA Indicator but reacts slower to price adjustment than the EMA. The reduced reaction is a function in that Wilder’s Smoothing Moving Average indicator formula holds a lower amount of past data for its calculation than the EMA. Wilder’s Smoothing indicator can be used in the exact same manner as other moving averages. Fx traders usually use Wilder’s Smoothing Moving Average to recognise trend direction, support and resistance levels.
Wilder’s Smoothing indicator is also helpful to minimize the volatility of the market. By focusing on trend direction, traders can see if a current trend is going to keep in the same direction or there is a signs for a possible trend reversal. Similarly to all forex indicator, traders should preferably use multiple indicators to confirm trading signals in order to enhance their opportunity of profit.