Linear Regression Slope Forex Trading Technical Analysis 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 candlestick loaded in the price chart.
The Indicator is calculated from the Linear Regression Indicator. The linear regression plots the trend of the price chart over a specified duration of time and this market trend is determined by plotting a Linear Regression Trend Line using the "least squares fit" method. The slope of this trend line is then calculated and 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 price
Linear Slope Regression = (raw value of slope * 100 / price).
The smoothing of the slope values is essential when comparing markets that are volatile & trade within wide price ranges for each price candle. Smoothed slope value will show the percent change in the price per every candle used to calculate the regression (best fit) line.
Forex 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 candle.
- 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 candle.
The regression slope is displayed as a bi-color histogram that oscillates above and below zero center line. Center-line that's used to generate Forex trading signals is set at the 0 level.
- A rising slope (greater than the previous value of 1 candle ago) is displayed in the Blue/Upward Slope color,
- A declining slope (lower than the previous value of 1 candle ago) is displayed in the Red/Downward Slope color.
Technical Analysis in Forex Trading
