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Linear Regression Slope Forex Technical Analysis and Linear Regression Slope Forex Trading Signals

The Linear Regression Slope calculates the slope/gradient value of regression lines which involve the current price bar and the previous n-1 price bar (where n = regression periods)

 

This Indicator calculates this value and updates it for each price candlestick loaded in the price chart.

 

The Indicator is calculated from the Linear Regression Indicator. The linear regression plots the trend of the price chart over a specified duration of time and this market trend is determined by plotting a Linear Regression Trend Line using the "least squares fit" method. The slope of this trend line is then calculated and this forms the linear regression.

Linear Regression Slope Forex Trading Indicator

Linear Regression Slope

 

The slope values are then smoothed by multiplying the raw slope indicator values by 100 and then dividing this value by the price

 

Linear Slope Regression = (raw value of slope * 100 / price).

 

The smoothing of the slope values is essential when comparing markets that are volatile and trade within wide price ranges for each price candlestick. The smoothed slope value will show the percent change in the price per every candlestick used to calculate the regression (best fit) line.

 

 

Forex Technical Analysis and Generating Forex Trading Signals

 

  • If the smoothing of the slope is 0.30, then the regression line is rising and adjusting at a rate of 0.30% for every candlestick.
  • If the smoothing of the slope of -0.30, then the regression line is going down and adjusting at a rate of -0.30% for every candlestick.

 

The regression slope is displayed as a bi-color histogram that oscillates above and below zero center line. The center line that is used to generate Forex trading signals is set at the 0 level.

 

  • A rising slope (greater than the previous value of 1 candlestick ago) is displayed in the Blue/Upward Slope color,
  • A declining slope (lower than the previous value of 1 candlestick ago) is displayed in the Red/Downward Slope color.

Technical Analysis of Linear Regression Slope Indicator

Technical Analysis

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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