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General Stock Discussion / Re: April 2015 Earnings
« on: May 07, 2015, 16:25 »
I really believe that there is one statistical tool that would be helpful here thatI have used many times; that being the Moving Average. It is a powerful tool for trend tracking and smoothing and takes less than one minute to calculate per each data point even for a slow person (like me).
1.Average a series of numbers. (eg 1+8+2=avg of 3.7. ) The number"3.7" will then be the first point in the new smoothed data set (graph or whatever.)
2.When you have the next point of additional raw data (lets say, for example "9"), remove the first number of your initial average series ("1"), and add the last number ("9") which results in the series (8+2+9), the average of which is 6.3. The data point 6.3, then, is your 2nd data point in the new smoothed graph. A move from 3.7 to 6.3 is a lot easier trend to follow than a move from 1 to 8.
There are a couple of disadvantages; eg your latest Smoothing Average (SA) graph will always be 2 points (eg months) behind the real data.
You can include as many points in your calculation as you wish, the more more points the better the smoothing, but then SA calculation represents some older data. Each situation has its sweetest spot.
BTW, I'm told that this is a fairly easy formula to set up on a spreadsheet. I often take a quick look at spreadsheet formulae to try to find MA but so far have been unsuccessful.
1.Average a series of numbers. (eg 1+8+2=avg of 3.7. ) The number"3.7" will then be the first point in the new smoothed data set (graph or whatever.)
2.When you have the next point of additional raw data (lets say, for example "9"), remove the first number of your initial average series ("1"), and add the last number ("9") which results in the series (8+2+9), the average of which is 6.3. The data point 6.3, then, is your 2nd data point in the new smoothed graph. A move from 3.7 to 6.3 is a lot easier trend to follow than a move from 1 to 8.
There are a couple of disadvantages; eg your latest Smoothing Average (SA) graph will always be 2 points (eg months) behind the real data.
You can include as many points in your calculation as you wish, the more more points the better the smoothing, but then SA calculation represents some older data. Each situation has its sweetest spot.
BTW, I'm told that this is a fairly easy formula to set up on a spreadsheet. I often take a quick look at spreadsheet formulae to try to find MA but so far have been unsuccessful.
