11.11 Simple Forecasting Method #3:  Trend Method

Before we move away from the simple methods, we’ll look at one more – the trend method.  While there are many ways in which this method could be implemented, the one we’ll use is this:  The last known observation, plus the difference between the last known observation and the one before it.  

Suppose we wish to use the trend method to predict the closing share price of Procter & Gamble (PG) on Tuesday, August 30th.  To do so, we need two pieces of information – the closing price on Monday the 29th and the closing price on Friday the 26th. 

Since the last known observed value is 141.69, and the difference between it and the previous observation is -0.60, we will predict the closing price on the 30th to be 141.69 – 0.60, or 141.09.