Moving Average

 

The moving average, also known as the rolling average or running average, provides us with a value to make more meaningful predictions from a time-series; it will be clearer to you before the end of this tutorial how moving average can smooth out a data cure, while giving a more accurate picture for forecasts/predictions. 

E.g.

It takes into account a few successive data values and find an average, and then extends it to cover the whole time-series. It is done as follows:

E.g.

1st 3-point moving average = (56 + 58 + 60)/3 = £ 58.00

2nd 3-point moving average = (58 + 60 + 59)/3 = £ 59.00

3rd 3-point moving average = (60 + 59 + 62 )/3 = £ 60.33

To learn the moving average interactively, please use this link.