What a smoother line leaves out
A moving average trades detail for a broader view.
The short answer
A smoothed value uses several observations. It can lag a sudden change and hide short-lived peaks. Specify whether the average is trailing or centred, and retain access to the original data. Do not fill the beginning with made-up averages.
A worked example
For [10, 14, 12, 18, 16], a trailing three-point average is 12 at point 3, about 14.67 at point 4 and about 15.33 at point 5. The first two points have no complete three-point window.
Your turn
Compare the final raw value of 16 with the final average of 15.33. They describe different quantities. Neither is a forecast of the next observation.
What this does not tell you
An illustrative calculation does not explain causes or predict future results. Check the dates, units and missing observations before using the method elsewhere.
Related term
Moving averageSources & review
Original Charts Haven example. All stated numbers are illustrative and allow you to repeat the calculation.
Next lesson: Look beyond the window