Data Smoothing

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Dictionary Says

Definition of 'Data Smoothing'

The use of an algorithm to remove noise from a data set, allowing important patterns to stand out. Data smoothing can be done in a variety of different ways, including random, random walk, moving average, simple exponential, linear exponential and seasonal exponential smoothing. Data smoothing can be used to help predict trends, such as trends in securities prices.
Investopedia Says

Investopedia explains 'Data Smoothing'

The random walk model is commonly used to describe the behavior of financial instruments such as stocks. Some investors believe that there is no relationship between past movement in a security’s price and its future movement. Random walk smoothing assumes that future data points will equal the last available data point plus a  random variable. Technical and fundamental analysts disagree with this idea; they believe future movements can be extrapolated by examining past trends.
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'Data Smoothing'

  • Simple Vs. Exponential Moving Averages

    http://www.investopedia.com/articles/trading/10/simple-exponential-moving-averages-compare.asp
    ... Tutorial.) The purpose of employing a simple moving average is to spot and measure
    trends by smoothing the data using the means of several groups of prices. ...

  • Do Adaptive Moving Averages Lead To Better Results?

    http://www.investopedia.com/articles/trading/08/adaptive-moving-averages.asp
    ... Unfortunately, while smoothing the data, moving averages will lag behind the market
    action and the trader will almost always give back a large part of their ...

  • Finding Market Movement With The ADX

    http://www.investopedia.com/articles/technical/02/041002.asp
    ... In other words, with all the smoothing and other data that is used to determine
    the plotting of the ADX, we are actually looking at 30 days of data versus the ...

  • Exploring The Exponentially Weighted Moving Average

    http://www.investopedia.com/articles/07/EWMA.asp
    ... our smoothing parameter. A higher lambda (eg, like RiskMetric's 94%) indicates slower
    decay in the series - in relative terms, we are going to have more data ...

  • The P/E Ratio: A Good Market-Timing Indicator

    http://www.investopedia.com/articles/technical/04/020404.asp
    ... work. A moving average (MA) reduces the noise by smoothing the data, allowing
    the trader to see the bigger picture more clearly. ...

  • Technical Analysis: Moving Averages | Investopedia

    http://www.investopedia.com/university/technical/techanalysis9.asp
    ... Exponential Moving Average (EMA) This moving average calculation uses a smoothing
    factor to place a higher weight on recent data points and is regarded as much ...

  • The Most Reliable Indicator You've Never Heard Of

    http://www.investopedia.com/articles/forex/09/mcginley-dynamic-indicator.asp
    ... Nevertheless it too can leave the data behind. ... McGinley believes moving averages
    should only be used as a smoothing mechanism rather than a trading system or ...

  • Beginner's Guide To Stockcharts.com: Indicators | Investopedia

    http://www.investopedia.com/university/how-to-use-stockcharts-financial-software/indicators.asp
    ... long term trend information from the data in order to favor short term data. ... a simpler
    version that allows for only two parameters and has a smoothing component ...

  • Weighted Moving Averages: The Basics

    http://www.investopedia.com/articles/technical/060401.asp
    ... To solve this problem, analysts now assign more weight to the most recent price
    data by using the exponentially smoothed moving average (EMA). ...

  • How To Evaluate Pension Risk By Analyzing Annual Costs

    http://www.investopedia.com/articles/analyst/03/081303.asp
    ... NYSE: GE) 2002 annual report, Footnote 6 contains the pension data we need. ... However,
    this amount was arrived at after using the smoothing techniques allowed by ...

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