Linear Regression Indices Technical Analysis & Linear Regression Trading Signals

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

Unlike the straight Regression Trendline technical indicator, the technical 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 Trend-line, but the resulting indices trend-line looks like the Moving Average.

But unlike the Moving Average, this indicator doesn't show as much delay since it is fitting a line onto data points rather than averaging them.

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

In other terms, this indicator shows where the chart indices prices "should" be trading based on a statistical basis & any disproportionate deviation from the regression line is likely to be short-lived.

Indices Technical Analysis and How to Generate Trading Signals

This stock indices indicator allows for stock indices price selection, adjusting number of periods and smoothing of stock indices price data before applying the calculation and the selection of smoothing type.

This stock indices technical indicator looks like a moving average but it has a bi-color representation.

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

Technical Analysis in Indices Trading