Description:
Linear Regression Intercept (LRI) is a statistical method used to forecast future values based on past data. Financial markets frequently employ it to identify the underlying trend and determine when prices are overextended. Linear regression utilizes the least squares method to create a trendline by minimizing the distance between observed price data and the line. The LRI indicator calculates the intercept of this trendline for each data point, providing insights into price trends and potential trading opportunities.
Input Parameters:
- Length: Number of periods used in the calculation.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Understanding Signals: A rising LRI suggests an upward trend, whereas a falling LRI indicates a downward trend. Traders may use this information to help determine the market’s direction and identify reversals.
- Combining the technical indicator with other indicators: The LRI can be used in conjunction with other technical indicators, such as moving averages, the Relative Strength Index (RSI), or traditional linear regression lines, to obtain a more comprehensive view of the market. In the case of traditional linear regression lines, the LRI helps traders identify the starting point of the trend, providing additional context to the overall trend direction.
- Entry/Exit Signals: When the LRI crosses above or below a specific threshold, traders may consider it a potential entry or exit point. For example, if the LRI crosses above zero, it might signal a possible buying opportunity.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.