Linear Regression

Type

Other indicator

Short introduction

Linear regression is used to determine trends. The prices are used as dependent variables and the time as independent variables. By using the Least Squares method, a straight line is drawn through the course of the price so that the distance between the price and the line is minimal. With this method, a trend between two points in time can be quantitatively represented. After the calculation, the regression line is in the middle of the price trend. The Linear Regression Indicator displays the end values of multiple linear regression trendlines. Each point along the indicator is a final value of a linear regression trendline. The result is similar to the moving average. However, unlike a moving average, the resulting line of the Linear Regression Indicator has less delay.

Interpretation

The Linear Regression Indicator is a forecast of the future price, which is already shown today. If the actual prices continue to be higher or lower than the forecast, it is expected that they will quickly return to a more realistic level. In other words: The indicator shows where the prices should be (according to statistical understanding). An excessive deviation from regression is likely to be short-lived and is expected to be corrected in the near future.

Default setting

• Period: 14 periods

In the indicator settings, you can also enter the corresponding "x-axis unit in milliseconds (86,400,000 ms = 1 day)".

Example: Chart with Linear Regression