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The Hamming, or weighted, moving average applies weighting factors to price data based on a function borrowed from spectral analysis. This function, known as Hamming, responds to the cyclical tendencies of data better than conventional moving averages by reducing the effect of erratic prices.
Hamming was developed to analyze complex changing sounds with arbitrary frequency. The Hamming function was designed to compute the spectrum of a finite-sized block, or record, of sample wave forms. It assumes that the block of sample wave forms represents exactly one period of periodic wave form. By application, Hamming provides the exact harmonic amplitude and phase spectrum of assumed, or proceeding, wave forms.
The behavior of price activity in a given market can resemble the behavior of complex sound wave forms.