Linear Regression Acceleration Analysis & Trading Signals

Linear Regression Acceleration calculates the change in the regression line's gradient on the current trading price bar from its gradient from the previous trading price bar. The value used to calculate the linear regression is referred to as the normalized acceleration value which is drawn for each price bar formed on the price chart.

Linear Regression Acceleration

If normalized acceleration is 0.30, then the regression line normalized slope will be moving upward at rate of 0.30 per each price bar.

Similarly, a normalized slope of -0.40 would indicate that regression line normalized slope is declining at the rate of -0.40 per price bar.

For example illustration, if the current trading price bar normalized slope value is 0.40 and the previous trading price bar normalized slanting slope reading is 0.20, then the normalized acceleration of the current price bar would be calculated as 0.40 - 0.20 = 0.20.

NB: It is crucial to realize that a positive acceleration reading doesn't equate to a positive slope value, it simply means that the slope gradient is increasing. A negative acceleration reading doesn't equate to a negative slope value, it simply means that the slope gradient is decreasing.

Implementation of Linear Acceleration Regression Trading Indicator

The Linear Regression Acceleration indicator allows for the following; trading price selection, regression periods, smoothing of raw trading price before applying the regression & selection of the smoothing type.

The resulting regression slope is displayed as a bi-colored histogram which oscillates above & below 0.

The reference line is set at the 0 level mark.

• A rising slope: (greater than its previous value of One bar before) is displayed in the up slope color.
• A falling slope: (lower than its previous value of one bar before) is shown using the down slope color.

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