Linear Regression Indices Analysis and Linear Regression Trade Signals

Another name for a regression line is a line of the best fit/best fit line. This indicator plots the market trend of the price over a specified duration of time. The market trend is determined by calculating a Linear Regression Trendline using the "least squares fit" method. This method helps to minimize the distance between the price data points and the line of best fit.

Linear Regression Indicator - Linear Regression Technical Indicator Analysis

Unlike the straight Regression Trend Line technical indicator, the indicator draws the end values of multiple Linear Regression trend lines. Any single point along the Linear Regression will be equal to the end value of a Regression Trendline, but the resulting trend line looks like the Moving Average.

But unlike the MA, this trading indicator does not show as much delay since it is fitting a line onto data points rather than averaging them.

Linear Regression is a prediction of the tomorrow's price drawn today, one day before. When the market prices are steadily higher or steadily lower than the forecasted price, then a trader can expect them to quickly return to the more realistic forecasted levels.

In other terms, this trading indicator illustrates where the prices "should" be trading based on a statistical basis and any disproportionate price deviation from the regression line is likely to be short lived.

Index Analysis & How to Generate Signals

This indicator allows for the price choice, adjusting number of periods and smoothing out of price data before applying the calculation & the choice of smoothing type.

This indicator looks like a MA but it has a bi-color representation.

Bullish Signal (Blue color) - A rising line (greater than its previous value one previous price bar before) is displayed in the up indices trend blue color, while
Bearish Signal (Red color) - a declining line (lower and lesser than its previous value 1 previous bar before) is displayed in the downtrend red color.

Linear Regression Indicator Analysis

Analysis in Indices

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Linear Regression Indices Analysis and Linear Regression Trade Signals

Index Analysis & How to Generate Signals