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Linear regression analysis on indices - what the signals actually mean.

Another name for a regression line is a best fit line. This indicator shows the overall direction of the market price over a set amount of time. The market trend is found by working out a Linear Regression Trend-line using a method called "least square fit". This way of doing things helps to make the distance between price numbers and the line of best fit as small as possible.

Linear Regression - Linear Regression Analysis

In contrast to the standard Straight Regression Trend Line technical indicator, this particular indicator plots the final values derived from numerous individual Linear Regression trendlines. Any single point located on the Linear Regression line corresponds precisely to the endpoint value of one specific Regression Trendline, yet the resulting composite line resembles a Moving Average.

In contrast to the Moving Average, this indicator exhibits less delay since it fits a line to data points instead of averaging them.

Linear Regression is a forecast of what the price will be tomorrow, made one day in advance. If market prices are consistently higher or lower than the predicted price, traders can expect them to return to the more expected levels quickly.

In simple terms, this indicator shows where prices ought to sit based on stats. Big shifts from the line tend to snap back soon.

Index Analysis and How to Generate Trading Signals

This indicator lets you pick the price, change the amount of time and smooth the price data before doing the math and picking the smoothing style.

This indicator resembles a Moving Average (MA) but features a bi-color display.

  • 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 colour) - a declining line (lower and lesser than its previous value 1 previous bar before) is displayed in the downtrend red color.

Linear Regression Analysis

Analysis in Indices

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