Introduction to the Linear Regression Indicator
The Linear Regression Indicator plots a highly sensitive moving average line that quickly responds to price action shifts and movements. The traditional moving averages tend to be lagging and produce late trading signals. That’s why the Linear Regression comes in handy for many forex traders. It uses better calculations, creating a formula that provides accurate trend momentum readings and better forex entry and exit points. One of the main advantages of the Linear Regression Indicator is its fast adaptation to price trends, which makes it especially attractive for forex scalpers.
The Linear Regression Indicator fits all kinds of timeframes and currency pairs. It is displayed in a separate window placed just below the main trading chart. The default settings can be modified directly from the input tab. Feel free to experiment with the settings and parameters to fit your personal preferences.
How does it work? How to apply in trading?
Trading Rules Explanation
This version of the Linear Regression Indicator plots a line that changes color depending on the direction of the trend and momentum. It plots a green line to indicate a bullish momentum, a red line to indicate a bearish momentum, and a yellow line to indicate a possible market reversal or market indecision. Generally speaking, it’s a good trend/momentum indicator, but we suggest using it in conjunction with some other technical analysis tools.
Follow these steps for a long trade:
- The Linear Regression Moving Average turns green
- Price swings higher from recent low swing
- Buy trade is triggered after the above conditions are met
- Set stop loss a few pips below the last low point of the market
- Take profit or exit trade whenever the Linear Regression turns yellow (early sign or possible reversal) or red or use your own preffered method of trade exit
Follow these steps for a short trade:
- The Linear Regression Moving Averages turns red
- Price swings lower from recent high swing
- Sell trade is triggered after the above conditions are met
- Set stop loss a few pips above the last high point of the market
- Take profit or exit trade whenever the Linear Regression turns yellow (early sign or possible reversal) or green or use your own preffered method of trade exit
As always, to achieve good results, remember about proper money management. To be a profitable trader you need to master discipline, emotions, and psychology. It is crucial to know when to trade, but also when not to trade. Avoid trading during unfavorable times and market conditions like low volume/volatility conditions, beyond major sessions, exotic currency pairs, wider spread, etc.
How to set up the Linear Regression indicator in MT4?
Download the Linear Regression.rar archive at the bottom of this post, unpack it, then copy and paste the Linear Regression.ex4 or Linear Regression.mq4 indicator files into the MQL4 folder of the Metatrader 4 trading platform.
You can gain access to this folder by clicking the top menu options, which goes as follows:
File > Open Data Folder > MQL4 > Indicators (paste here).
Now go to the left side of your MT4 terminal. In the Navigator find the gauge name, right-click it and select Attach to the chart.
The Linear Regression indicator is well worth adding to your trading collection but remember about having realistic expectations. Just like any other technical analysis tool, is not capable of providing accurate signals 100% of the time. Thus, this forex indicator provides false signals occasionally. Its performance will vary significantly depending on market conditions. Feel free to develop your own trading system based around it.
Linear Regression Indicator Free Download
To download the Linear Regression Indicator for Metatrader 4 (MT4) for free just click the button below: