Charts

# Linear Regression Forecast (LRF)

Linear regression is a statistical tool used to help predict future values from past values. It is commonly used as a quantitative way to determine the underlying trend and 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. This linear regression indicator plots the trendline value for each data point. ## Configuration Options • Period: Number of bars to use in the calculations.
• Field: Price or combination of prices to use as the base for average calculations. Possible values include:
• Open
• High
• Low
• Close
• HL/2 $$\left ( \frac{High + Low}{2} \right )$$
• HLC/3 $$\left ( \frac{High + Low + Close}{3} \right )$$
• HLCC/4 $$\left ( \frac{High + Low + Close + Close}{4} \right )$$
• OHLC/4 $$\left ( \frac{Open + High + Low + Close}{4} \right )$$
• Color Selectors: Colors to use for graph elements.
• Display Axis Label: Whether to display the most recent value on the Y axis.

## Formula

The best fit line associated with the n points (x1, y1), (x2, y2), . . . , (xn, yn) has the form y = mx + b

$slope\;=\;m\;=\;\frac{\sum_{i=1}^{n}(x_{i} - \bar{x})(y_{i} - \bar{y})}{\sum_{i=1}^{n}(x_{i} - \bar{x})^{2}}$

$intercept\;=\;b\;=\;\bar{y} - m\bar{x}$