Moving Averages

Moving averages smooth out short term variation to make it easier to observe long term trends. Let’s say, for example. You wanted to visualize the sales trend at a retail store. You start with daily data, and your chart appears volatile and hard to interpret as more people shop on the weekends, so sales spike on those days.

You could sum up sales by week, but that may take out some of the detail.

Using a moving average, you can both smooth out the daily volatility while observing the long term trend.