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Practical Predictive Analytics by Ralph Winters

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Exponential moving average

For a simple moving average (SMA), equal weight is given to all data points, regardless of how old they are or how recently they occurred. An exponential moving average (EMA) gives more weight to recent data, under the assumption that the future is more likely to look like the recent past, rather than the older past.

The EMA is actually a much simpler calculation. An EMA begins by calculating a simple moving average. When it reaches the specified number of lookback periods (n), it computes the current value by assigning different weights to the current value,and to the previous value.

This weighting is specified by the smoothing (or ratio) factor. When ratio=1, the predicted value is entirely based upon the last ...

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