Linear Regression Slope computes the linear regression, and plots the slope. The indicator shows the trend strength and momentum by drawing red and green histogram bars. This allows you to benefit from signal generation, and it allows you to recognize when momentum is strong or weak.
How to Use the Linear Slope for Trading
The indicator signals a trade entry signal when it crosses the zero line. The indicator will give a trade entry signal if the bars become longer. This is a sign that momentum is increasing. As momentum decreases, the histograms begin to shrink. It’s best to stay away from markets where the bar is close to the zero line. This indicates that there are ranging markets.
Signals to Buy
When the indicator crosses over the zero line, buy and the histogram bars turn to green. When the indicator turns red, exit.
When the histogram bar turns from green to red, open a short position. When it changes back to green, exit.
Linear regression Slope Trading Example
As momentum increases, the indicator displays green bars which lengthen in an uptrend. The market becomes bearish when the red bars turn green. To indicate a growing downtrend momentum, the bar length will increase.
The linear regression line is the basis of the indicator. The indicator plots a slope line, which provides buy and/or sell signals and indicates the trend direction or momentum.