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