# How do you determine the weighting to use in a weighted moving average model?

the weighting is determined by applying the average of the quantities being utilized, which becomes the weight, together to get an overall average value. Each of the quantities being utilized is assigned a weight, which is more or less based on the time of the data. The more recent data will be weight more heavily than historical data.

 ebaines Posts: 10,584, Reputation: 5794 Expert #2 Nov 1, 2012, 12:12 PM
You're going to have to determine what the weighting factors should be, as a function of age of the data. How far back does the data go? How would you weight data that is 1 day old versus data that is a month old, or a year old, or a decade old? Asked another way - if yesterday's data is worth, say, 100 points in the weighting scheme, how old does data have to be for it to be worth only 50 points and hence counts only half as much? Once you figure out how you'd like to weight the age of the data then you can come up with a formula or table that reflects the weighting.

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