Description

• This indicator consists of three lines which act as mean, support and resistance
• Linear regression plots a line that best represents the data period
• It forms a middle line and then plots positive and negative standard deviations to as upper and lower bands
• It follows the envelope principle i.e. price should lie
• It helps to identify reversal, signals and checking linearity of a trend.

Interpretation

• If stock price closes above upper band, it’s a buy signal
• If stock price closes below lower band, it’s a sell signal

Default Parameters Used/Inputs

• Close line
• Bars- required for calculating Linear regession
• Factor- - used in formula

Returns/Output

Linear regression and two standard deviation lines

Formula

Upper Band = Middle line + factor*Standard Deviation (SD)
Lower Band = Middle line - factor*Standard Deviation (SD)
where,
Middle line = Linear regression calculation.
Factor – It is the absolute number. E.g. 1,2,3 etc