# Moving averages

Moving averages provide data analysts and scientists with a basic predictive model. Despite its simplicity, the moving average method is widely used in the technical analysis of financial markets to define a dynamic level of support and resistance for the price of a given security.

### Note

Let's consider a time series *x _{t}= x(t)* and a function

*f(x*that reduces the last

_{t-p}, x_{t-1})*p*observations into a value or average. The prediction or estimation of the observation at

*t+1*is defined by the following formula:

Here, *f* is an average reducing function from the previous *p* data points.

## The simple moving average

Simple moving average, a smoothing method, is the simplest form of the moving averages algorithms [3:1]. The simple moving average of period *p* estimates the value at time *t* by computing the average value of the previous *p* observations using the following formula:

### Note

The simple moving average of a time series *{xt}* with a period *p* is computed as the average of the last *p* observations...