Linear Regression Slope Technical Analysis & Linear Regression Slope Trading Signals
Linear Regression Slope indicator calculates the slope/gradient value of regression lines which involves the current trading price bar & the previous n-1 price bar (where n = regression periods)
This Indicator calculates this value and updates it for each price candlestick loaded in the trading price chart.
The Indicator is calculated from the Linear Regression Technical Indicator. The linear regression plots the trend of the trading price chart over a specified duration of time and this trend is determined by plotting a Linear Regression Trendline using "least squares fit" method. The slope of this trendline is then calculated & this forms the linear regression.
Linear Regression Slope
The slope values are then smoothed by multiplying the raw slope indicator values by 100 and then dividing this value by the trading price
Linear Slope Regression = (raw value of slope * 100 / trading price).
The smoothing of the slope values is essential when comparing markets which are volatile & trade within wide trading price ranges for each price candle. The smoothed slope value will show the percent change in the trading price per every candlestick used to calculate the regression (best fit) line.
Stock Technical Analysis & How to Generate Signals
- If the smoothing of the slope is 0.30, then the regression line is rising and adjusting at a rate of 0.30% for every candlestick.
- If the smoothing of the slope of -0.30, then the regression line is going down & adjusting at a rate of -0.30% for every candlestick.
The regression slope is displayed as a bi-color histogram that oscillates above and below the zero center line. The centerline that is used to generate signals is set at 0 level mark.
- A rising slope (greater than the previous value of 1 candlestick ago) is displayed in the Blue/Upwards Slope color,
- A declining slope (lower than the previous value of 1 candlestick ago) is displayed in the Red/Downwards Slope color.
Technical Analysis in Indices Trading
Learn More Lessons & Tutorials:
- MT4 Stock Indices Trading Strategy Tester Window
- What is NETH 25 Spread? NETH 25 Bid Ask Spread
- Stock Index Concept of Support & Resistance Levels to Trade Indices
- How to Interpret New Stock Indices Order on MT5 Android App
- How to Study Stock Index Strategies
