Trend Effects in Exponential Smoothing
As . tared earlier an upward or downward trend in data collected over a eloquence of time periods causes the exponential forecast to always lag behind (that is to be above or below) the actual amount. Exponentially smoothed forecasts can be corrected some hat b including a trend adjustment. To correct for the trend we now need two smoothing constants. In addition to the smoothing constant a the trend equation also require a trend smoothing constant delta (0). Like alpha. delta is limited to values between 0 and The delta reduces the impact of the error that occurs
between the actual and the forecast. If both alpha and delta are not included, the trend would overreact to errors.
To initiate the trend equation. the trend value must be entered manually. This first trend value can be an educated guess or computed from past data. The equation to compute the forecast including trend (FIT) is