To make this reflect in our moving average, you can give more weight to the latest data and less to past data. So, we are better off if we rely more on the value of Day 10. Let’s say that the weather is getting cooler with every passing day and you are using a 10-day moving average to get the temperature trend.ĭay-10 temperature is more likely to be a better indicator of the trend as compared to Day-1 (since the temperature is dropping with every passing day). In Excel, you can do this easily using the AVERAGE function (this is covered later in this tutorial). This can be achieved by averaging the data points in the given duration.

In our daily temperature example, when you simply take an average of the past 10 days, it gives the 10-day simple moving average. This is the simple average of the data points in the given duration.

There are three types of moving averages: For example, in case there is a really hot day, the three-day moving average of the temperature would still make sure that the average value has been smoothened (instead of showing you a really high value that could be an outlier – a one-off instance). One of the benefits of using the moving averages is that gives you the trend as well as smooths out fluctuations to an extent. Moving average is heavily used for technical analysis and a lot of banks and stock-market analysts use it on a daily basis (below is an example I got from the Market Realist site). And if on Day 4 I ask you the 3-day moving average temperature, you will give me the average of Day 2, 3, and 4.Īs new data is added, you keep the time period (3 days) the same but use the latest data to calculate the moving average. If I have three days of daily temperature data, you can easily tell me the average of the last three days (hint: you can use the AVERAGE function in Excel to do this).Ī Moving Average (also called as the rolling average or running average) is when you keep the time period of the average the same, but keeps moving as new data is added.įor example, on Day 3, if I ask you the 3-day moving average temperature, you will give me the average temperature value of Day 1, 2 and 3. I am sure you know what’s an average value.

Formatting the Moving Average Trend Line.

Adding Moving Average Trend Line to a Column Chart.

Calculating Exponential Moving Average using Formulas.

Calculating Weighted Moving Average using Formulas.

Calculating Simple Moving Average using Formulas.

Calculating Moving Averages (SMA, WMA, EMA) using Formulas in Excel.Calculating Simple Moving Average (SMA) using Data Analysis Toolpak in Excel.

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