Linear Regression
Objectively identify trend direction and potential reversals with Linear Regression channels.
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