The image above shows a linear regression channel.
A midline is a line that combines closing prices over a selected period. The trend lines above and below are at the same distance from the midline.
They are parallel to each other and represent one standard deviation from the midline. Trading rules on the regression channel are quite simple. The strategy is based on the expectation that as soon as the price reaches an external level, there are good chances that it will return to the middle line. Thus, the upper line represents the resistance level, and the lower one represents support.
The best line determines the direction of the trend. Thus, the method of using this indicator is to assume the continuation of the trend, and then trade in the direction of the trend. As long as the trend continues, we can consider the middle line as the equilibrium point. Obviously, when trading along the midlines, gaps periodically occur that lead to the formation of a new trend.
Therefore, at any time when the price goes beyond the channel, you should be careful. A prolonged finding of the price outside the channel can mean the formation of a new trend. This is why you should use regression trend analysis cautiously and be responsive to risk management.
Trade in profit! Push up Like button if you like my reviews and help you understand the current market situation! Subscribe to the channel and stay tuned for trading ideas that are not trading recommendations.
And remember! You must have your head on your shoulders! Do not trust anyone - not even me :)
Thanks to your likes, I understand how many people rated my review positively. I spend my personal time monitoring the market situation and share my opinion openly with you. Please take this moment into account and treat it with understanding.
A midline is a line that combines closing prices over a selected period. The trend lines above and below are at the same distance from the midline.
They are parallel to each other and represent one standard deviation from the midline. Trading rules on the regression channel are quite simple. The strategy is based on the expectation that as soon as the price reaches an external level, there are good chances that it will return to the middle line. Thus, the upper line represents the resistance level, and the lower one represents support.
The best line determines the direction of the trend. Thus, the method of using this indicator is to assume the continuation of the trend, and then trade in the direction of the trend. As long as the trend continues, we can consider the middle line as the equilibrium point. Obviously, when trading along the midlines, gaps periodically occur that lead to the formation of a new trend.
Therefore, at any time when the price goes beyond the channel, you should be careful. A prolonged finding of the price outside the channel can mean the formation of a new trend. This is why you should use regression trend analysis cautiously and be responsive to risk management.
Trade in profit! Push up Like button if you like my reviews and help you understand the current market situation! Subscribe to the channel and stay tuned for trading ideas that are not trading recommendations.
And remember! You must have your head on your shoulders! Do not trust anyone - not even me :)
Thanks to your likes, I understand how many people rated my review positively. I spend my personal time monitoring the market situation and share my opinion openly with you. Please take this moment into account and treat it with understanding.
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