Linear regression is a statistical tool used to measure trends. Linear regression uses the least squares method to plot the line. The linear regression line is a straight line extending through the prices.
The most common use of Linear Regression is:
- To trade in the direction of the linear regression line. Colby and Meyers found that trading in this manner provided good results using a 66-week figure. The only drawback was a large draw down in relation to the profitable trades.