What a trend line can and cannot tell you
A trend line is the straight line that best fits your monthly sales. It is the simplest forecasting tool.
How it works
The method (called linear regression) picks the line that is closest to all the points. Its slope tells you how much sales change per month on average.
The fit score
R² runs from 0 to 1. Near 1 means the points sit close to the line. Near 0 means the line explains very little, so do not rely on it.
What it ignores
Seasons, festivals, price changes and one-off events are not in a straight line. Use a forecast as a rough guide and check it against what you know about your business.
In Super B.A.: The ML Lab in Learn & Lab draws the line, shows the fit score and explains it in plain words. Open the app
Related guides
- Month-over-month vs year-over-year: which to use
- Average, median and why one number can mislead
- How to group customers by spending
General information for learning. It is not financial, tax, legal or investment advice.