Let's say you have four initial moving averages - A, B, C && D. You then create three new (derivative) moving averages from those four using the following simple formulas:
Moving Average E = Moving Average A - Moving Average B.
Moving Average F = Moving Average B - Moving Average C.
Moving Average G = Moving Average C - Moving Average D.
Now, you want to create on final moving average - H- which is the weighted moving average of E, F, && G. What would be the formula?
Obviously, it would be H = (E*weight1) + (F*weight2) + (G*weight3)/(weight1 + weight2 + weight3).
But how would you figure out the correct weighting?
Any help would be appreciated! Thanks!