Moving averages provides data analysts and scientists with a basic predictive model. Despite its simplicity, the moving average method is widely used in a variety of fields such as marketing survey, consumer behavior, or sport statistics. Traders use the moving averages to identify levels of support and resistance for the price of a given security.
Averaging reducing function:
Let's consider a time series xt = x(t) and a function f(xt-p-1,… xt) that reduces the last p observations into a value or average. The estimation of the observation at t is defined by the following formula:
Here, f is an average reducing function from the ...