The Linear Regression Indicator is used for trend identification and trend following, similar to a moving average. The indicator should not be confused with Linear Regression Lines, which are straight lines fitted to a series of data points. The Linear Regression Indicator plots the end points of a whole series of linear regression lines drawn on consecutive days. The advantage of the Linear Regression Indicator over a normal moving average is that it has less lag than the moving average and responds more quickly to changes in direction. The downside is that it is more prone to whipsaws, where a price heads in one direction and then quickly moves in the opposite direction.
- From within a chart, from the Edit menu select Studies.
- Choose Linear Regression (Least Square)and click Add to add the study to the Applied Studies group.
- Complete parameters as necessary.
Once the study is defined, you can elect to uncheck/check to remove and add the study to your chart.