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# Linear Regression R2 Indicator Set up, Strategies, Formula Linear Regression R2 indicator is used to ascertain the strength of the dominant market trend. The indicator also followed by the Linear Regression technique. We have already seen the usage of LR in the Linear Regression Forecast indicator and also in the Linear Regression Intercept indicator. LRR2 indicator is used to determine the intensity of the rise or fall of the market trend. This provides a means of quantifying the strength of the trend. So, let’s begin with the functions of the indicator first.

## What are the Functions of Linear Regression R2 Indicator?

• The Linear Regression R2 indicator function determines the extent of a linear relationship of a value to time.
• There, prices move closely in a linear relationship with the passing of time and the stronger the trend.
• In a period, this indicator shows the strength of the trend.
• The Linear Regression R2 indicator measures the extent of a security’s movement that can be explained by the linear regression.
• We know that a trend doesn’t go in one direction forever. In a certain time, the trend will be exhausted. In order to determine that you can use linear regression r2.
• If you have a confidence level of 95%, a trend is statistically significant for a linear regression line of a certain period. So, in case the R-squared reading is below the 95% confidence level for a particular period, there is no statistically significant trend.

## How to Set up Linear Regression R2 Indicator on Chart?

So, now I am going to demonstrate the way by which you can easily set up the LRR2 indicator on your chart technically. Therefore, first get into the description of Zerodha Kite, then Upstox pro.

### Set up LRR2 on Zerodha Kite

In Zerodha Kite this indicator is Linear Reg R2. This is available under the STUDIES section and can be attached to a chart as shown below in the example of Reliance Industries intraday trading chart.

As you see in the image above in Zerodha Kite, the default parameter of Linear Reg R2 indicator is 14 and the indicator is plotted on the value of CLOSE. But you can change the parameter if you like and also calculate the value on any other field like OPEN, HIGH, LOW, etc. The Linear Regression R2 indicator is very useful as a corroborating indicator.

### Set up LRR2 on Upstox Pro

To set up LRR2 on Upstox pro, start with opening any of your preferred charts. Then open the indicator section. After that, search for the indicator and apply it.

## Top Most Strategies of Linear Regression R2 Indicator

• Linear Regression attempts to determine the strength of trends. if prices move in a straight line, this suggests a strong trend.
• Any trend does not go in one direction forever. There is a certain time that the trend will be exhausted and reversed or pullback.
• In the momentum indicators and moving averages, there is a need for validation of trends to be effective constantly.
• One can use LRR2 with the Regression Slope indicator and the Slope indicates the overall market trend – i.e. either positive or negative, and the R-Squared indicates the strength.
• This indicator is very valuable as a confirming indicator.
• In the momentum indicators like Stochastics, RSI, CCI, etc and moving average indicators need the validation of trend in order to be reliably useful.
• This Linear Reg R2 indicator offers a way of indicating the intensity of the trend of prices.
• One full cycle indicates a rally in one direction.
• You can use the indicator to determine trend strength and oscillates between 0 to 1. The trend is strong whenLRR2 is high and weak when it is low.

## Some Advanced Strategies on LRR2 Indicator

• One thing is important, High r-squared values accompanied by a small slope may not interest short-term traders.
• And, High r-squared values accompanied by a large slope value may be of great interest.
• Now, I am going to show you another example of an advanced strategy

Here, I put LRI (linear regression intercept) and LRR2 together to get more details. At the point of crossover with price, entry the trade and the same way exit it. It helps to overlook the extra noise of the indicator.

Here is, another approach that combines the R-Squared with an oscillator. In this case, signals will be produced in accordance with the oscillator’s readings between the overbought and the oversold levels. And, the R-Squared should remain at low levels (usually below the 95% level of confidence, that suggests that the market’s behavior is ”less trendy”).