Automated Trading and Strategy Testing Forum
i-Regression Channel generates regression channel.
Linear regression channel consists of two parallel lines located at the equal distance from the linear regression trend line. The distance between the channel borders and the regression line is equal to the value of the highest close price deviation from the regression line.
The indicator is implemented in two versions:
Author: Nikolay Kositsin
Linear Regression Channel (degree = 1):
Square (Parabolic) Regression Channel (degree = 2):
Cubic Regression Channel (degree = 3):
Indicators: Linear Regression Channel
newdigital, 2013.09.27 09:39
Similar to the 200-day Moving Average, large institutions often look at long
term Linear Regression Channels. A Linear Regression Channel consists of three
The multi-year chart of the S&P 500 exchange traded fund (SPY) shows
prices in a steady uptrend and maintaining in a tight one standard deviation
Linear Regression Channel:
The upper and lower channel lines contain between themselves either 68% of
all prices (if 1 standard deviation is used) or 95% of all prices (if 2 standard
deviations are used). When prices break outside of the channels, either:
When price falls below the lower channel line, a buy signal is usually
An opportunity for selling occurs when prices break above the upper channel
Other confirmation signs like prices closing back inside the
regression channel could be used to initiate buy or sell
orders. Also, other technical indicators should be used to confirm.
When price closes outside of the Linear Regression Channel for long periods
of time, this is often interpreted as an early signal that the past price trend
may be breaking and a significant reversal might be near.
Linear Regression Channels are quite useful technical analysis charting
tools. In addition to identifying trends and trend direction, the use of
standard deviation gives traders ideas as to when prices are becoming overbought
or oversold relative to the long term trend.