Simple Moving Average Forecast

What is this formula?

The Simple Moving Average Forecast estimates the next value of a time series by calculating the arithmetic mean of the most recent observations.

It is one of the most widely used forecasting techniques because of its simplicity and ease of implementation.

When to use it

Use this method when historical data exhibits relatively stable behavior without strong trends or seasonality.

Example

Monthly sales:

Y1 = 120

Y2 = 135

Y3 = 150

Formula:

F=(Y1+Y2+Y3)/n

Substitution:

F=(120+135+150)/3

F=135

Result:

Forecast for the next period = 135

Applications

Sales forecasting

Inventory planning

Demand forecasting

Economic indicators

Business analytics

Operations management

Note

The Simple Moving Average is a forecasting approximation rather than an exact law. It assumes that future values will behave similarly to recent observations. Forecast accuracy decreases when strong trends, seasonal effects, or structural changes are present. More advanced forecasting models may provide better results under such conditions.