Moving Averages

The moving averages (MA) algorithms are the classical forecasting algorithms that have been used for decades in the forecasting field. They are basically simple algorithms that can even be computed by hand (and this is why they have been so popular in the past when computers were not available to the general public).

All the Moving Averages algorithms share some common trait:

• They smooth the curve.
•  They introduce some lag in the calculation so that the MA lags the original signal.
•  They cut the highest frequencies (i.e. numerically they are low pass filters).

Several variations exist of the same basic algorithm that essentially computes a weighted sum. Each past term is multiplied by a constant or variable quantity and the result summed up to give the MA value.