Basic indicators of the trading platform are not always enough to minimize the risks of false alarms. The linear regression strategy uses combined tools that need to be found on the Internet and independently delivered in MT4. Templates are free, unarchiving and copying take 5-7 minutes.
Three indicators for a linear regression strategy
The linear regression strategy is based on three indicators, one of which is perhaps the most common in intraday tactics:
- LinearRegression. A relatively new tool, developed in 1991. His goal is to predict the price potential before the market becomes overheated. It forms two parallel lines equidistant from the price, the width of the channel depends on the timeframe and settings. The indicator marks with color the direction of the trend, using the approximation of price indications (a scientific method that involves replacing some objects with others that are close to the original, but simplified) linear function. The calculation formula is complicated, you should not go into details;
- XaserFV. Indicator for determining volatility used in trend trading strategies. It is auxiliary, as it allows screening out the flat state of the market. Zero value is flat;
- RSI. The relative strength index acting as an oscillator. With a signal from Xaser FV about the flat and the RSI level above 70, we can say that the market is in the overbought stage, but is ready to get out of it. Similarly, you can use the stochastics – if it turns from the 80th level down – a signal to a short position.
- Linear Regression:
- timeframe = H4. It is also the most optimal for Xaser FV, which is not suitable for scalping, but it analyzes perfectly for long periods;
- period = 40;
- price = 0 (by closing the candle).
- Xaser FV:
- period = 14;
- flat calculation period = 0.
The remaining parameters can be left basic, they are not very important in the calculation.
- period = 14;
- price = Close;
- levels: 30, 70, 50.
Currency pair – almost any. The combination of indicators on long timeframes is suitable even for exotic currencies.
Conditions for opening a long position:
- Linear Regression has been red for a while, after which the control candle turns green;
- Xaser FV shows an upward trend, at least 3 candles being above zero. Before that, the indicator at least three candles was at the level of “0”. In other words, a clear upward movement begins after the flat, which is not a correction;
- RSI above at least level 50.
You can enter the market on the next candle. The target profit horizon is 30 points, after which 50% of the position is insured by trailing and released to float freely. The recommended length of stop loss is 30-60 points. Conditions for opening a short position are fundamentally opposite.
The linear regression strategy gives fairly frequent entry signals. As a signal gain, you can use RSI levels 30 and 70, but then the number of signals will greatly decrease. If the effectiveness of the strategy begins to decline, an adjustment of the period of trend indicators is necessary (it is better not to touch the oscillator). Download the templates, test the strategy on the demo, and then on the cent account and earn!