Adds exponential moving average algorithm

financial/exponential_moving_average.py

@@ -0,0 +1,72 @@
+"""
+    Calculates exponential moving average (EMA) on the series of numbers
+    Wikipedia Reference: https://en.wikipedia.org/wiki/Exponential_smoothing
+    Reference: https://www.investopedia.com/terms/e/ema.asp#toc-what-is-an-exponential-moving-average-ema
+
+    Exponential moving average is used in finance to analyze changes stock prices.
+    EMA is used in conjunction with Simple moving average (SMA), EMA reacts to the
+    changes in the value quicker than SMA, which is one of the advantages of using EMA.
+"""
+
+from collections.abc import Iterator
+
+
+def exponential_moving_average(
+    series_generator: Iterator[float], window_size: int
+) -> Iterator[float]:
+    """
+    Returns the generator which generates exponential moving average of the given
+    series generator
+    >>> list(exponential_moving_average((ele for ele in [2, 5, 3, 8.2, 6, 9, 10]), 3))
+    [2.0, 3.5, 3.25, 5.725, 5.8625, 7.43125, 8.715625]
+
+    :param series_generator: Generator which generates numbers
+    :param window_size: Window size for calculating average (window_size > 0)
+    :return: Returns generator of which returns exponentially averaged numbers
+
+    Formula:
+
+    st = alpha * xt + (1 - alpha) * st_prev
+    alpha = 2/(1 + window_size) - smoothing factor
+
+    Exponential moving average (EMA) is a rule of thumb technique for
+    smoothing time series data using the exponential window function.
+    """
+
+    if window_size <= 0:
+        raise ValueError("window_size must be > 0")
+
+    # Calculating smoothing factor
+    alpha = 2 / (1 + window_size)
+
+    # Defining timestamp t
+    t = 0
+
+    # Exponential average at timestamp t
+    st = None
+
+    for xt in series_generator:
+        if t <= window_size:
+            # Assigning simple moving average till the window_size for the first time
+            # is reached
+            st = float(xt) if st is None else (st + xt) * 0.5
+        else:
+            # Calculating exponential moving average based on current timestamp data
+            # point and previous exponential average value
+            st = (alpha * xt) + ((1 - alpha) * st)
+        t += 1
+        yield st
+
+
+if __name__ == "__main__":
+    import doctest
+
+    doctest.testmod()
+
+    test_series = [2, 5, 3, 8.2, 6, 9, 10]
+    test_generator = (ele for ele in test_series)
+    test_window_size = 3
+    result = exponential_moving_average(test_generator, test_window_size)
+    print("Test series: ", test_series)
+    print("Window size: ", test_window_size)
+    print("Result: ", list(result))