Linear Regression Slope Technical Analysis & Linear Regression Slope Signals
Linear Regression Slope indicator calculates the slope/gradient value of regression lines which involves the current price bar & the previous n-1 price bar (where n = regression periods)
This Indicator calculates this value and updates it for each price candle 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 given 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 / 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 in calculating the regression (best fit) line.
Stock Technical Analysis & How to Generate Signals
- If the smoothing out 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 out 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 Trade
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