Signal and variation.
THE PROBLEM
Every figure varies. Most variation means nothing.
WHAT NOISE LOOKS LIKE
Up one month, down the next, with no direction.
WHAT A TREND LOOKS LIKE
Consistent movement across several periods.
HOW TO TELL
Plot the figure over at least twelve periods.
A chart reveals in seconds what a table conceals.
WHAT ELSE HELPS
A moving average, smoothing short-term variation.
WHAT NOT TO DO
React to a single period Declare a trend from two points
THAT SECOND POINT
Two points always form a line. That is not a trend.
WHAT TO ESTABLISH
What normal variation looks like for each figure.
Then you know what is unusual.
WHAT TO INVESTIGATE
Movement beyond normal variation, or consistent direction.
WHAT TO ASK
Is this a change, or the usual fluctuation?
WHAT TO RECORD
Your view at the time, so you can check it later.
