Which formula represents the Wilder Moving Average?

The Wilder Moving Average, developed by J. Welles Wilder, is specifically designed to smooth out price data to create a more consistent trend-following indicator, particularly in the context of commodities and other financial instruments. This average utilizes a formula that is notably weighted towards more recent prices while also considering previous averages, which helps to reduce lag compared to traditional moving averages.

The correct option aligns with the Wilder Moving Average definition. It takes the previous average and incorporates the latest closing price into the formula, thereby adjusting the average while maintaining a consistency with the historical price context. By using the formula where the previous average is multiplied by (n-1) and added to the new closing price, and then dividing the total by n, it emphasizes both the influence of past averages and the new data point, thus providing a smoother representation of price action.

This feature is particularly helpful for traders looking to track trends over time and refine their strategy based on the most relevant data points, allowing for a better gauge of market sentiment and direction.