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Starting from future smoothing your way to present

What does smoothing mean in forecasting?

Exponential Smoothing Methods are a family of forecasting models. They use weighted averages of past observations to forecast new values. The idea is to give more importance to recent values in the series. Thus, as observations get older in time, the importance of these values get exponentially smaller.

Why is smoothing important?

The idea behind data smoothing is that it can identify simplified changes in order to help predict different trends and patterns. It acts as an aid for statisticians or traders who need to look at a lot of data—that can often be complicated to digest—to find patterns they would not otherwise see.

What are smoothing techniques?

It is a short-term forecasting technique that is frequently used in the production and inventory environment, where only the next period’s value is required to be forecast. Because only three numbers are required to perform exponential smoothing, this technique is simple to update.