Time series analysis is the statistical method of analyzing time-ordered data. This type of analysis is commonly used in fields such as finance, economics, and engineering, among others, to predict future trends and patterns in the data. However, the complexity of time series analysis can make it difficult for beginners to understand and apply.
In this article, we will introduce you to the Prophet library, a powerful tool for time series forecasting. We will provide an overview of Prophet and walk you through a simple example to show how it works.
What is Prophet?
Prophet is an open-source library for time series forecasting developed by Facebook. It is designed to be easy to use, flexible, and scalable, making it suitable for both beginners and experienced users.
Prophet uses an additive model that decomposes the time series into trend, seasonality, and holidays. It then fits the model to the data using Bayesian optimization techniques to generate forecasts.
Prophet has become a popular tool for time series forecasting due to its ease of use and accurate predictions.
Installing Prophet
Before we dive into the example, let's quickly go over how to install Prophet. Prophet is available for both Python and R. In this example, we will be using Python, but the installation process for R is similar.
To install Prophet in Python, open your terminal and run the following command:
pip install fbprophet
Example: Forecasting the Price of Bitcoin
Now that we have Prophet installed, let's walk through a simple example of using Prophet to forecast the price of Bitcoin.
First, we will import the necessary libraries:
import pandas as pd
import matplotlib.pyplot as plt
from fbprophet import Prophet
Next, we will read in the Bitcoin price data:
df = pd.read_csv('BTC-USD.csv')
We can then take a look at the data using the head() method:
print(df.head())
This will output the first five rows of the data:
Date Open High Low Close Adj Close Volume
0 2021-01-01 28994.00977 29600.62695 28803.58594 29374.15234 29374.15234 40730301359
1 2021-01-02 29376.45508 33155.11719 29091.18164 32127.26758 32127.26758 67865420724
2 2021-01-03 32033.97070 34608.55859 32000.72461 32782.02344 32782.02344 78665235202
3 2021-01-04 32810.94922 33440.21875 28722.75586 31971.91406 31971.91406 81163475380
4 2021-01-05 31977.04102 34437.58984 29091.18164 33992.42969 33992.42969 67547435456
We can see that the data contains the date, open price, high price, low price, close price, adjusted close price, and volume.
To use Prophet, we need to rename the columns to ds and y:
df = df[['Date', 'Close']]
df = df.rename(columns={'Date': 'ds', 'Close': 'y'})
The ds column should contain the date and time information, and the y column should contain the time series data.
We can then create a Prophet model and fit it to our data:
model = Prophet()
model.fit(df)
Once the model is fit, we can use it to make predictions for future dates. We can do this by creating a new dataframe with future dates using the make_future_dataframe() method and then using the predict() method to generate predictions:
future = model.make_future_dataframe(periods=365)
forecast = model.predict(future)
In this example, we are creating a new dataframe with 365 days of future dates. We can then generate predictions for these future dates using the predict() method.
We can visualize the predictions using the plot() method:
fig = model.plot(forecast)
plt.show()
This will generate a plot showing the historical data as well as the predicted values for the future:
From the plot, we can see that the model predicts the price of Bitcoin will continue to increase over the next year.
Conclusion
In this article, we introduced you to Prophet, a powerful tool for time series forecasting. We walked through a simple example of using Prophet to forecast the price of Bitcoin.
Prophet is a great tool for beginners to get started with time series analysis. It is easy to use and provides accurate predictions. With a little practice, you can use Prophet to forecast trends and patterns in your own time series data.