A statistical technique used to identify the strength and direction of the market trend is using the Linear Regression Slope as this is a centred oscillator type indicator. It fluctuates above and below a central line drawn at 0.
This indicator can be used to measure the strength or weakness and direction of the momentum.
- The momentum is positive when the slope is above 0
- The trend is negative when the slope is below 0.
Example:
If the normalized slope is 0.2, this means that the regression line is increasing at 0.20% rate per bar.
A slope of -0.50 suggests that the regression line is decreasing at a rate of 0.50% per bar.