Linear Regression Curve
Linear Regression Curve (LRC) is a type of Moving Average based on the linear regression line equation (y = a + mx). The calculation produces a straight line with the best fit for the various prices for the period. The end point of this line is used to plot the LRC. A signal line (PRICE), which is price chosen by the user is used to help trigger signals. Two user factors are applied to the price to determine the buy or sell signal. The user may change the input (close), period length and factors. This indicator’s definition is further expressed in the condensed code given in the calculation below.
How To Trade Using Linear Regression Curve
A buy signal is generated when the price moves below the linear regression curve times a user defined percent value. Conversely, a sell signal is given when the price moves above the linear regression curve times a user defined percent value.
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//input = price, default is closing price
//period = linear regression period, default is 9
//pcAbove = percent above, default is .009
//pcBelow = percent below, default is .009
//index = current bar number
price = getPrice(index, input, 0); linReg = linRegLine(index, period, input, period); //end point of lin. reg. line plot1: linReg; plot2: price; //Signals pcAbove = 1 + pcAbove/100.0; pcBelow = 1 - pcBelow/100.0; sell = price moreThan; linReg * pcAbove; buy = price lessThan; linReg * pcBelow;