Moving averages are among the most important and useful technical indicators for traders. However, many novice market participants feel daunted by the concept. Moving averages are also extremely relevant to long-term investors and many still don’t know where to start implementing these critical signals in their portfolios.
The U.S. Adaptive Moving Average Fund (WAMA) closes those gaps. WAMA, which debuted on March 12, tracks the WisdomTree U.S. Adaptive Moving Average Index. The strategy also employs a concept that’s easy to digest for investors of all stripes. When the index’s observed moving average is conducive to equity ownership, the ETF leans into stocks. When bearish signals flash, the strategy adapts, increasing its exposure to T-bills. The point is that WAMA does the “homework” for advisors and investors. Ultimately, this makes it much easier to embrace one of the vital tools of technical analysis.
“Moving averages are a common way for technical traders to begin the process of price analysis. It is often one of the first indicators that traders will add to their charts and will serve as a measure on its own or in comparison with other indicators,” according to CME Group.
Understanding WAMA Utility
For investors pondering WAMA’s utility, it pays to understand the usefulness of moving averages themselves. Fortunately, that objective is easy to accomplish.
“Moving averages are often used to compare where the current price of the underlying instrument is in relation to support and resistance on a chart. When price moves down to a moving average line or up to a moving average line, traders can use this as a signal that price might stop or retrace at that point,” added CME.
Importantly, WAMA’s methodology focuses on the 200-day moving average. That’s relevant to end users because shorter-term moving averages can be bumpier, which subjects market participants to unclear signals and unnecessary noise.
“The 200-day simple moving average (SMA) is a widely used technical indicator that helps traders and analysts identify long-term market trends. It represents the average closing price of an asset over the past 200 trading days and is plotted as a smooth line on a price chart,” noted Investopedia.
WAMA’s ex-US counterpart is the WisdomTree International Adaptive Moving Average Fund (WIMA).
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Disclosures
This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.
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