Linear Regression R-Squared

Description:

The Linear Regression R-Squared indicator is a statistical regression model that measures the variance between a dependent variable and an independent variable. In trading, this is calculated using the relationship between price and time. It abstracts the movement and the linear regression of the movement. When the price and the R-squared value move closely together, it suggests a stronger trend. This indicator can be used similarly to a momentum oscillator, helping to identify divergences as well as trend strength.

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:

Trend Identification: Technical analysis is often used to identify trends in asset prices. Traders analyze historical price data to spot patterns such as uptrends, downtrends, or sideways movements. Trend lines, moving averages, and trend indicators like the Moving Average Convergence Divergence (MACD) are commonly employed to identify and confirm trends. Traders may use this information to make decisions such as entering or exiting positions based on the direction of the trend.
Support and Resistance Levels: Support and resistance levels are price levels where a stock or other asset tends to find buying (support) or selling (resistance) pressure. Technical analysts identify these levels by analyzing historical price movements and identifying areas where prices have repeatedly reversed or stalled. Support and resistance levels can help traders make decisions about when to enter or exit trades, set stop-loss orders, or take profit targets. Common tools for identifying support and resistance levels include horizontal lines, pivot points, and Fibonacci retracement levels.
Technical Indicators: Technical analysts use various indicators to generate buy or sell signals and to assess the strength or weakness of price trends. These indicators are typically calculated using price and volume data and can provide insights into momentum, volatility, and market sentiment. Some popular technical indicators include the Relative Strength Index (RSI), Stochastic Oscillator, Bollinger Bands, and the Average True Range (ATR). Traders often use combinations of different indicators to confirm signals and develop trading strategies.

This feature can be used in: