Index

Weighted Close

Overview

The Weighted Close indicator is simply an average of each day's price. It gets its name from the fact that extra weight is given to the closing price. The Median Price and Typical Price are similar indicators.


Interpretation

When plotting and back-testing moving averages, indicators, trendlines, etc, some investors like the simplicity that a line chart offers. However, line charts that only show the closing price can be misleading since they ignore the high and low price. A Weighted Close chart combines the simplicity of the line chart with the scope of a bar chart, by plotting a single point for each day that includes the high, low, and closing price.


Example

The following chart shows the Weighted Close plotted on top of a normal high/low/close bar chart of Peoplesoft.


Calculation

The Weighted Close indicator is calculated by multiplying the close by two, adding the high and the low to this product, and dividing by four. The result is the average price with extra weight given to the closing price.


Index