Linear Regression Slope Indicator is one of the technical indicators by using the linear regression (LR) technique which is applied in technical analysis to determine. When the market trending up or down and what is the intensity of the rise or fall, given the past trend of prices.
The Linear Regression Slope Indicator is a centered oscillator type of indicator which is similar to momentum indicators. The formula of the LR Slope can be found here. The momentum is positive when the Slope is above 0 and negative when it is below 0. This indicator can be used to measure the strength or weakness and direction of the momentum.
The LR Slope Indicator is available in the studies section in Zerodha Kite. Its also included in the new Kite 3 App. By default the parameter of this indicator is 14, but it can be customized by optionally changing the parameters. Check the image above that shows how to attach the indicator as we have done on Nifty index.
Typically this Linear Regression Slope is presented as a Line chart or Histogram below the price chart. A reference line is drawn at 0 which is depending on whether the slope is positive or negative, the slope value will oscillate above or below 0. Check the image below that shows the use of the indicator on HDFC share price.
This Linear Regression Slope Indicator for multiple securities can be compared to determine relative strength and weakness. It also can be used with other indicators for identifying possible entry and exit levels.This can also be calculated for short, medium and long-term to identify changes within the major trend of the security.
The LR Slope is an indicator and does not predict or signal tops and bottoms. It follows the price trend and provides the signal after the top or bottom has been formed. This cannot and should not be used by itself. It can provide contrary signals. It is also an intensive calculation.