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Linear Regression Acceleration Forex Technical Analysis and Forex Trading Signals

Linear Regression Acceleration calculates the change in the regression line's gradient on the current price bar from its gradient from the previous price bar. The value used to calculate the linear regression is referred to as the normalized acceleration value which is plotted for each price bar formed on the price chart.


Linear Regression Acceleration Technical Indicator

Linear Regression Acceleration

 

If the normalized acceleration is 0.30, then the regression line normalized slope will be rising at the rate of 0.30 per price bar.

 

Similarly, a normalized slope of -0.40 would indicate that the regression line normalized slope is declining at the rate of -0.40 per price bar.

 

For example, if the current price bar normalized slope value is 0.40 and the previous price bar normalized slope value is 0.20, then the normalized acceleration of the current price bar would be calculated as 0.40 - 0.20 = 0.20.

 

NB: It is important to realize that a positive acceleration value doesn’t equate to a positive slope value, it simply means the gradient of the slope is increasing. A negative acceleration value doesn’t equate to a negative slope value, it simply means the gradient of the slope is decreasing.

 

Implementation of Linear Acceleration Regression

 

The Linear Regression Acceleration indicator allows for the following; price selection, regression periods, smoothing of raw price before applying the regression and selection of the smoothing type.

 

The resulting regression slope is displayed as a bi-colored histogram that oscillates above & below 0.

 

The reference line is set at the 0 level mark.

  • A rising slope; (greater than its previous value 1 bar before) is displayed in the up slope color.
  • A declining slope; (lower than its previous value 1 bar before) is displayed using the down slope color.

Market Sentiment: Did you know that traders and market participants have been buying US Dollars because USD is the best currency to hold when there is a recession – this is because the dollar is held as the reserve currency by most central banks and during recession most traders also prefer to hold this currency, this is why USD is known as a safe haven currency. But now the market sentiment has changed and all the economies are on their way to recovery and most have even returned to economic growth based on the economic reports coming from these countries.

During times of economic growth traders prefer to sell the dollars they had bought and start buying higher yielding currencies. These higher yielding currencies include EURO and Great Britain Pound. This is why the Euro is starting to appreciate against the USD. The EURUSD is trending upwards; Crude Oil Prices have also started to move back up because demand of oil is growing because of the global economic growth, Gold is also in an upward trend because during economic growth the prices of commodities also go up because there is increase in their demand.

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