The indicator displays:
- regression line (Show vector? = true);
- locus of the first value (Show first locus? = true);
- locus of the last value shifted forward (Show last locus? = true).
Indication can be applied to eight types of price.
Regression line is useful for trend visualization.
The loci are to be used for analysis of historical data.
The locus of the first value can be used as the Moving Average - MA. For full functional compliance with the one built in terminal, Shift parameter is added.
More About Each Item
The regression line (or line of best fit, LR) fits the condition, that the total difference of the true values and the ones defined by the LR is the minimum (i.e. zero). Thus, the "randomly" scattered points are replaced (approximated) by the line.
Therefore, HR is nothing but a trend Line in its direct meaning.
Since the lines are defined by two points the minimum value of Slowing is 2.
The loci of the first and the last values
To analyze the historical data, there are loci drawn by the end and the beginning of the regression line. For ease of comparison, the locus of the last value is shifted forward to be located within the same time coordinate (candle, bar) with the locus of the first point.
Obviously, if the first value is below the last, LR is facing down, otherwise, it goes up; the intersection of the lines means change of direction; the greater the slope of the LR, the greater the distance between the loci.
When using the indicator as MA (first value locus), pay attention to the fact that it has less lag compared to the built-in terminal methods of averaging. This means that when using strategies based on the MA-intersection, the signal will be more reliable with equal values of slowing.
1. Following a trend is one of the basic trading axioms. Defining a trend by the regression line yildes a bit more reliable result than when using MA allowing you to visually differ slowing/strengthening of the trend from its reversal.
2. The indicator may also be useful for traders looking for trend reversals. If the slowing value is correct, the reversal can be seen clearly.