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Linear Regression Slope

www.cmsfx.comThe Linear Regression Slope indicator calculates the slope value of theoretical regression lines which involve that bar and the previous n-1 bars (n = regression periods) for each bar loaded in the chart. (See the Linear Regression Indicator for additional details about regression lines). The slope values are then normalized by multiplying the raw slope values by 100 and then dividing by the price (raw slope * 100 / price).

Interpretation

The normalization of the slope values is important when comparing markets that trade within different price ranges. The normalized slope value basically shows the percent change in price per bar of the regression (best fit) line. If the normalized slope is 0.20, then the regression line is rising at a rate of 0.20% per bar. Similarly, a normalized slope of -0.55 would indicate that the regression line is declining at the rate o 0.55% per bar.

Implementation

The Regression Periods, Regression Price, Pre-Smoothing Price Periods and Pre-Smoothing MA Type inputs have been parameterized to allow the user full customization of this indicator. The resulting regression slope indicator is displayed as a bi-color histogram that oscillates above and below 0. A reference line is set at the 0 level. A rising slope (greater than its previous value 1 bar ago) is displayed in the UpSlope color, while a declining slope (lower than its previous value 1 bar ago) is displayed in the DownSlope color.

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