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Linear Regression |
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Linear Regression is a statistical technique utilizing the least squares method to fit a straight line through scattered data points. By taking these points in a dynamic manner on each price bar, a line comparable to a moving average is created and plotted.
The Linear Regression Line trend indicator was created to determine where a market's price might be in the near future by utilizing current and past price history. Some investors who use this technique are of the opinion that when prices rise above or fall below the linear regression line, they are overextended and will start to move back towards the line, effectively using it as a means to decide whether a retracement in a directional price action might happen.
If prices trend upwards, linear regression tries to statistically analyze what the upward bias of the price may be comparative to the current price. If prices trend downwards, it will try to statistically estimate the downward bias of the price.
On a chart a Linear Regression line is essentially the same as a moving average except that it reacts very quickly to changes in price direction and holds closer to price action, displaying the inclination for prices to move back towards the regression line if there is any larger move away. Because of this, the speed of reversal can cause whipsaws to occur.
PARABOLIC
Initially developed as a "Stop And Reverse" indicator by Welles Wilder Jr., the Parabolic is best used as trailing stop in a trending move.
The Parabolic considers the relationship between a price and time, utilizing this relationship to decide acceleration of the parabolic. This is determined by an acceleration factor that starts at 0.02 and increases by the same amount every time a new high in an uptrend or a new low in a downtrend is attained. The difference between price and the previous parabolic is then used to compute the parabolic for the next bar. The acceleration factor increases until it reaches a "maximum step" defaulted at 0.20. Once price reaches the parabolic, the position of the parabolic reverses and starts at the highest high in a reversal from a move higher, or the lowest low in a reversal after a move lower.
The Parabolic may also used to decide stop points as the Parabolic performs well as a trailing stop in a trend. A drawback is that during consolidating markets the Parabolic has a tendency to experience whipsaws, and therefore it is recommended that you not use it as a signal to establish a position.
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| Symbol |
Rate |
| GBP:CHF |
1.747703 |
| GBP:JPY |
155.484239 |
| GBP:USD |
1.638403 |
| NZD:USD |
0.627050 |
| EUR:CAD |
1.545998 |
| EUR:CHF |
1.516857 |
| EUR:GBP |
0.867915 |
| EUR:JPY |
134.947096 |
| EUR:USD |
1.421994 |
| AUD:JPY |
76.394373 |
| AUD:USD |
0.805000 |
| USD:CAD |
1.087204 |
| USD:CHF |
1.066711 |
| USD:JPY |
94.899879 |
| USD:SEK |
7.613010 |
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Disclimer: This website is for informational purposes only and is not intended to provide
specific commercial, financial, investment, accounting, tax, or legal advice.
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© ForexCenter.com, 2005, All Rights Reserved
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History