EconomyEinstein

In statistics, a moving average or rolling average is one of a family of similar techniques used to analyze time series data. It is applied in finance and especially in technical analysis. It can also be used as a generic smoothing operation, in which case the raw data need not be a time series.

A moving average series can be calculated for any time series. In finance it is most often applied to stock prices, returns or trading volumes. Moving averages are used to smooth out short-term fluctuations, thus highlighting longer-term trends or cycles. The threshold between short-term and long-term depends on the application, and the parameters of the moving average will be set accordingly.

Mathematically, each of these moving averages is an example of a convolution. These averages are also similar to the low-pass filters used in signal processing.

Running Average, on the other hand, is a method for continuously updating the average of a data set while including all of the data in that set that has been received until that point.

Want more of the gory details? [Source:Wikipedia.com]

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