Linear Regression Analysis & Linear Regression Trading Signals

Another name for a regression line is a line of the best fit/best fit line. This indicator plots the trend of the price over a specified duration of time. The market trend is determined by calculating a Linear Regression Trendline using the "least squares fit" method. This method helps to minimize the distance between the price data points and the line of best fit.

Unlike the straight Regression Trendline indicator, the technical indicator plots the end values of multiple Linear Regression trend lines. Any single point along the Linear Regression will be equal to the end value of a Regression Trendline, but resulting trend-line looks like the MA.

But unlike the MA, this trading indicator doesn't show as much delay since it's fitting a line onto data points rather than averaging them.

The Linear Regression is a prediction of the tomorrow's trading price drawn today, one day before. When the prices are steadily higher or lower than the forecast trading price, then a trader can expect them to quickly return to more realistic fore-casted levels.

In other terms, this technical indicator shows where the chart prices "should" be trading based on a statistical basis and any disproportionate deviation from the regression line is likely to be short-lived.

Gold Analysis and How to Generate Signals

This indicator allows for price selection, adjusting number of periods and smoothing of price data before applying the calculation & the selection of smoothing type.

This indicator looks like a Moving Average but it has a bi-color representation.

• Bullish Signal (Blue color) - A rising line (greater than its previous value 1 previous bar before) is displayed in the up trend blue color, while
• Bearish Signal (Red color) - a declining line (lower than its previous value 1 previous bar before) is displayed in the down trend red color.

Technical Analysis in Gold