Linear Regression

Concept

Linear Regression calculates the "best fit" straight line through price data using least squares method. Shows objective trend direction.

• Linear Regression Line: Best fit line through prices
• Linear Regression Channel: Line plus deviation bands
• R-Squared: 0-1 measure of how well price fits the line

Trading

• R² > 0.8 = strong trend, trade with trend
• R² < 0.5=weak trend, use range strategies
• Price at upper channel = overbought vs trend
• Price at lower channel = oversold vs trend