Linear Regression is a statistical method of following a trend. Its results are usually close to the moving average and their methods of use are similar. But unlike MA, Linear Regression has a smaller delay and is more responsive to price changes.
Linear Regression is used to indicate the dominant trend on the market with slight delay from the actual price of the asset. It can also provide information about future divergence of the main trend, but only when the price starts moving near the trend line within a narrow range.
Methods of use:
| 1. | The direction of the indicator shows whether there is a bullish or bearish trend in the market at the moment. |
| 2. | The crossing of the indicator and the price chart confirms the trend’s change. It is only a confirmation because the change in this indicator is late in comparison with a price change. |
Note: If the price changes uniformly around the regression line, the market trend should have a tendency to continue.
