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Am inceput sa-l folosesc si da rezultate
Forum on trading, automated trading systems and testing trading strategies
Indicators: Linear Regression Channel
newdigital, 2013.09.27 09:39
Linear Regression ChannelSimilar to the 200-day Moving Average, large institutions often look at long term Linear Regression Channels. A Linear Regression Channel consists of three parts:
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:
- Buy or sell opportunities are present.
- Or the prior trend could be ending.
Linear Regression Channel Buy SignalWhen price falls below the lower channel line, a buy signal is usually triggered.
Linear Regression Channel Sell SignalAn opportunity for selling occurs when prices break above the upper channel line.
Other confirmation signs like prices closing back inside the linear regression channel could be used to initiate buy or sell orders. Also, other technical indicators should be used to confirm.
Trend ReversalsWhen 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.
Forum on trading, automated trading systems and testing trading strategies
Indicators: LinearRegressionLine
newdigital, 2014.01.14 19:10
Linear Regression LineA Linear Regression Line is a straight line that best fits the prices between a starting price point and an ending price point. A "best fit" means that a line is constructed where there is the least amount of space between the price points and the actual Linear Regression Line.
The Linear Regression Line is mainly used to determine trend direction. A chart of AT&T (T) stock is given below:
Traders usually view the Linear Regression Line as the fair value price for the future, stock, or forex currency pair. When prices deviate above or below, traders expect prices to go back towards the Linear Regression Line.
As a consequence, when prices are below the Linear Regression Line, this could be viewed as a good time to buy, and when prices are above the Linear Regression Line, a trader might sell. Of course other technical indicators would be used to confirm these inexact buy and sell signals.
A useful technical analysis charting indicator that uses a Linear Regression Line is the Linear Regression Channel (see: Linear Regression Channel), which gives more objective buy and sell signals based on price volatility.