Linear Regression Slope Study

By Samantha Baltodano

TL;DR:

The Linear Regression Slope study is a tool used by traders to predict the future price of a security. It uses a math concept called linear regression analysis to identify trends in the price data, and then calculates the expected price change based on these trends. 

The Linear Regression Slope calculates the expected price change based on linear regression analysis using the least squares method. It can generate trade signals based on the slope of the linear regression line, with a high positive value of the slope indicating a buying opportunity and a low negative value indicating a sell or short position.

You can access this indicator here.

What Is The Linear Regression Slope Study?

The Linear Regression Slope study is a tool used by traders to predict the future price of a security, such as a stock or a commodity. It uses a math concept called  linear regression analysis to identify trends in the price data, and then calculates the expected price change based on these trends.

The Math and Calculation Behind the Linear Regression Slope

The Linear Regression Slope study calculates the expected price change based on linear regression analysis using the least squares method. 

This method involves finding the line of best fit through a series of data points, and then using this line to predict future price movements.

To calculate the Linear Regression Slope Indicator, you first determine the linear regression line for a given set of price data. This line represents the trend in the data, and can be used to predict future price movements. The slope of the line represents the rate of change of the trend, which is then used to generate a signal for trading.

Trade Signals

The Linear Regression Slope study can generate trade signals based on the slope of the linear regression line. 

A high positive value of the slope might indicate a buying opportunity, as it suggests that the price is likely to continue to increase in the short term. 

Conversely, a low negative value of the slope can be considered a signal to sell or open a short position, as it suggests that the price is likely to decrease in the short term.

It is important to note that this type of prediction is purely mathematical, and is based on least squares averaging of previous values. 

Therefore, it is not a foolproof method for predicting future price movements, and should be used in conjunction with other tools and strategies. 

Nonetheless, the Linear Regression Slope study can be a useful tool for traders looking to identify short-term trends in the price of an asset, and to make informed trading decisions based on this information.

Test The Linear Regression Slope Study

Great news! 

You can back test this exact strategy on historical data for any of your favorite symbols using TradingView. 

This strategy has already been built and all you have to do is log in and take it for a spin. You can access this indicator here.

If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Linear Regression Slope Study.

Summary

• The Linear Regression Slope study is a tool used by traders to predict the future price of a security.
• It uses linear regression analysis to identify trends in the price data and calculates the expected price change based on these trends.
• The Linear Regression Slope study calculates the expected price change based on linear regression analysis using the least squares method.
• The slope of the linear regression line is used to generate trade signals, with high positive values indicating a buying opportunity and low negative values indicating a sell or short position.

Linear Regression Slope is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.

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