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Sorry about the lateness of this reply, I got the equations from equis; I
have attached the web page. The equations are at the bottom. b-the slope of
the line- is already given in AB. You might also like to check the trading
strategy given in S&C october issue.
The reason is my formula is wrong. If you care to look at it:
sum(C,n)/n=ma(C,n)
sum(n,n)=n^2
and the b terms are canceld out, which leads to a moving average
calculation.
so you are right, thanks geoff. The problem is in the calculation of sum(x).
I off to Melbourne for the long weekend. Any one care to take a look at it.
other wise I will, when I get back.
Seems a PhD isn't good for the simple things.
Cheers
Brook
----- Original Message -----
From: <gmulhall@xxxx>
To: <bewers@xxxx>
Sent: Sunday, September 23, 2001 9:34 AM
Subject: Linear Regression
> Brook,
>
> Do you have a reference for these formulae pls ?
>
> I could not find any difference between a 30 day ma and the 30 day
> lin reg line. This surprised me so I'd like to check the source.
>
> Thanks,
>
> Geoff
>
Title: Linear Regression Lines - Technical Analysis from A to Z
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LINEAR REGRESSION
LINES
<FONT face="Times New Roman"
size=4>Overview
Linear regression is a statistical tool used to predict future values
from past values. In the case of security prices, it is commonly usedto
determine when prices are overextended.
A Linear Regression trendline uses the least squares method to plot a
straight line through prices so as to minimize the distances between the
prices and the resulting trendline.
Interpretation
If you had to guess what a particular security's price would be
tomorrow, a logical guess would be "fairly close to today's price." If
prices are trending up, a better guess might be "fairly close to today's
price with an upward bias." Linear regression analysis is the statistical
confirmation of these logical assumptions.
A Linear Regression trendline is simply a trendline drawn between two
points using the least squares fit method. The trendline is displayedin
the exact middle of the prices. If you think of this trendline as the
"equilibrium" price, any move above or below the trendline indicates
overzealous buyers or sellers.
A popular method of using the Linear Regression trendline is to
construct Linear Regression Channel lines. Developed by Gilbert Raff,the
channel is constructed by plotting two parallel, equidistant lines above
and below a Linear Regression trendline. The distance between the channel
lines to the regression line is the greatest distance that any one closing
price is from the regression line. Regression Channels contain price
movement, with the bottom channel line providing support and the top
channel line providing resistance. Prices may extend outside of the
channel for a short period of time. However if prices remain outside the
channel for a longer period of time, a reversal in trend may be
imminent.
A Linear Regression trendline shows where equilibrium exists. Linear
Regression Channels show the range prices can be expected to deviate from
a Linear Regression trendline.
The <A
href="">Time Series
Forecast indicator displays the same information as a Linear
Regression trendline. Any point along the Time Series Forecast is equal to
the ending value of a Linear Regression Trendline. For example, the ending
value of a Linear Regression trendline that covers 10 days will have the
same value as a 10-day Time Series Forecast.
Example
The following chart shows the Japanese Yen with a Linear Regression
Channel.
<IMG height=267
src=""
width=380>
Calculation
The linear regression formula is:
<IMG height=20
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width=84>
Where:
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