Linear Regression Analysis and Linear Regression Signals

Another name for a regression line is a line of the best fit/best fit line. This indicator plots the trend of the price over a specified duration of time. The trend is determined by calculating a Linear Regression Trendline using "least squares fit" method. This method helps to minimize the distance between the price data points & the line of best fit.

Linear Regression Analysis in XAUUSD - Linear Regression Analysis Explained

Unlike the straight Regression Trend Line indicator, the technical indicator draws end values of multiple Linear Regression trend-lines. Any single point along the Linear Regression will be equal to the end value of a Regression Trend-Line, but resulting trendline looks like the Moving Average(MA).

But unlike the Moving Average, this indicator does not show as much delay since it is fitting a line onto data points rather than averaging them.

Linear Regression is a prediction of the tomorrow's price drawn today, one day before. When the prices are steadily higher or lower than the forecast trading price, then a gold trader can expect them to quickly return to the more realistic forecasted levels.

In other terms, this indicator shows where the prices "should" be trading based on a statistical basis & any dis-proportionate deviation from the regression line is likely to be short-lived.

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This indicator allows for the price selection, adjusting number of periods & smoothing out of price information before applying the calculation & the selection/choice of smoothing out type.

This indicator looks like a MA(Moving Average) but it has a bi-colour representation.

Bullish Signal (Blue color) - A rising line (greater and higher than its previous value one previous bar before) is displayed & shown in the up-trend blue colour, while
Bearish Signal (Red color) - a declining/falling line (lesser than its previous value one previous bar before) is shown & displayed in the down-trend red colour.

Linear Regression Analysis in Gold - Linear Regression Analysis Explained

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