# Simple Regression VertexFX VTL indicator.

#### OmSaiTech

Simple Regression is a VertexFX VTL indicator. The indicator plots the trend channel on the basis of the method of simple regression. This channel can be viewed as a line of "equilibrium" prices, and any deflection up or down indicates increased activity of buyers or sellers.

The simple Regression technique is a statistical methodology to determine how closely a set of points are related to each other and whether a function can define these set of points. This concept is applied in this indicator. At first step, we calculate the regression variables over the most recent PERIOD candles. In the second step, we calculate the Slope and Intercept based on the regression variables. In the final step, the Linear Regression Line is approximated and calculated for the latest candle using the calculated Slope and Intercept.

The idea behind this technique is that in trending markets, the prices are well-organized and can be predicted with better accuracy than in sideways markets where the randomness is higher and hence predictability is lower. When the market is trending upwards or downwards, the accuracy of the Slope and Intercept is better, and hence the predicted value of the Linear Regression Line is more accurate. At the same time, the predicted Linear Regression Line follows the trend. When the trend stalls, the variation in the line increases and it is very likely that the price breaches the line. This step is repeated when a new trend is detected. Hence the Linear Regression Line provides an excellent trend-following signal with minimal lag.

When the indicator is attached to the chart its plot a channel having a upper and lower levels around a centerline. The LookbackPeriod parameter decides how many past candles to be considered while plotting the channel. The Upper line can be considered as resistance level and the lower line can be considered as support level. The slop of the channel indicates the trend of the market. When the slope is upword it represents the Uptrend of the market and when the slope is downward it reflect the down trend in the market.

When slope of the channel is downward and price is bouncing back from upper level then it’s the better time to take short entry, which can be exited when the price reaches to lower level. Similar, When the slope of the channel is upward and price is bouncing back from the lower level line there we can take a long position and it can be exited when either the price reached to the middle level or at the upper level.

Configurable Parameters:

1.LookbackPeriod : The period of candles that we look back in order to form the channel

2.RegressionStyle: Style of the lines that are making the channel.

3.RegressionColor : Color of the line that makes the channel.

https://www.hybridsolutions.com/plugins/client-vtl-plugins/free/simple-regression-.html

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