Linear Regression Forecast

Linear Regression Forecast

Linear regression is a commonstatistical method used to forecast values using least squares fit. The Slopeshows how much prices are expected to change per unit of time. Slope gives youthe general direction of the trend (positive or negative), r-squared gives youthe strength of the trend. A high r-squared value can be associated with a highpositive or negative Slope.

When the Slope of the trend firstbecomes significantly positive, It could open a long position. You could sell,or open a short position when the Slope first becomes significantly negative.

It may even be consider opening a short-term position opposite the prevailing trendwhen it is observe that the Sloperounding off at extreme levels. if the Slope is at a relatively high level andbegins to turn down, It may consider selling or opening a short position.

The Linear Regression Slopeindicator provides the slope at each bar of theoretical regression lines, whichinvolve that bar and the previous N-1 bars (N being the regressionperiod).

The data, based on the priceselected, is smoothed using the moving average period and type. The resulting data is then used to formregression lines ending at each bar, using the regression periodspecified. The slope of each barsregression line is the recorded as the linear regression slope value for thatbar.

The Slope shows how much pricesare expected to change per unit of time. It gives the general direction of thetrend (positive or negative)