📊 TECHNICAL
Linear Regression Channel
Plots a statistical best-fit trendline over N bars with parallel standard-deviation channel lines, revealing trend direction and overbought/oversold extremes.
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Live Demo — Linear Regression Channel applied to NIFTY 50 (illustrative)
PriceEMA(9)EMA(21)SMA(20)
What is Linear Regression Channel?
Fits a statistical best-fit straight line through the last N closing prices and draws parallel channel lines offset by a standard-deviation multiple, giving an objective read on trend direction and how stretched price is.
How It Works
- A least-squares regression line is calculated across the most recent
lengthbars. - The standard deviation of price from that line is calculated over the same window.
- Upper/lower channel lines are plotted parallel to the regression line, offset by
stddevstandard deviations. - Slope indicates trend direction; position within the channel indicates how stretched the move is.
Parameters
| Parameter | Default | Description |
|---|---|---|
| length | 100 | Number of bars used to fit the regression line and channel |
| stddev | 2 | Standard deviation multiple used to set channel width |
Signal Interpretation
- An upward-sloping line confirms a statistically valid uptrend; downward confirms a downtrend.
- Price pressing the upper line suggests the move is statistically overbought relative to trend.
- Price pressing the lower line suggests the move is statistically oversold.
- A reversion from a channel extreme back toward the midline is the classic mean-reversion read.
- A flattening line signals the trend is losing statistical significance.
Tips & Best Practices
- Shorten
lengthto track shorter-term swings; lengthen for the dominant longer-term trend. - Widen
stddevon more volatile instruments so the channel isn't constantly breached. - Mean-reversion reads are more reliable in Ranging regimes than strongly Trending ones.