linear regression indicator

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Instructions for the TiG Linear Regression

TIG Linear Regression

Version 1.1

June 2011

INSTRUCTIONS FOR THE TIG LINEAR REGRESSION

In statistics, a Linear Regression Line is a straight line that best fits

all the data points of interest, between two points. In other words it

is a mean (average) line which bisects the data points, leaving an

equal amount of data on each side of the line.



Table of Contents

Disclaimer .............................................................................................................................................................. 3

Policies ..................................................................................................................................................................... 4

Welcome .................................................................................................................................................................. 5

Getting Started ..................................................................................................................................................... 6

PC Requirements ............................................................................................................................................ 6

Choosing a brokerage or financial spread betting company .................................................. 6

Choosing a charting platform.................................................................................................................. 6

A word of warning ......................................................................................................................................... 6

Installation and Setup .................................................................................................................................. 7

TiG Easy Install ........................................................................................................................................... 7

The TiG Linear Regression Channel (LRC) Indicator ......................................................................... 8

TiG Extra .............................................................................................................................................................. 10

Input settings for the TiG Linear Regression Channel (LRC) .................................................... 11

Contact Us ........................................................................................................................................................... 12



Disclaimer

THE PRODUCT IS PROVIDED AS IS WITHOUT WARRANTY OF ANY KIND. THE ENTIRE RISK OF THE

PRODUCT IS ASSUMED BY YOU. THE RISK ASSOCIATED WITH THE RESULTS AND PERFORMANCE OF THE

PRODUCT IS ALSO ASSUMED BY YOU.

We are not brokers nor in any way authorised by the FSA. We do not and cannot give any investment advice. We

are not engaged in rendering any investment or other professional advice. If you want investment advice, seek

a licensed or registered investment advisor.

There are no representations of potential earnings made by us or by you. Only those persons financially

prepared should invest. Any and all trades posted in private or public, of any kind, should be viewed as

hypothetical paper trades and without merit; and if they were accurate, they may never be able to be

duplicated in the future. Your attempt to duplicate any posted trades may be hindered by the inherent delay in

receiving a post AND executing that post, market liquidity, AND your own trading issues, including, but not

limited to slippage, commissions, trading software, internet outages, psychological factors. The information

contained in this document or any service or product we may provide in the future has been obtained from

sources believed to be reliable, however, there is no guarantee to its accuracy or its completeness. We do not

accept responsibility for typographical or verbal errors, omissions or failure to transmit information in a timely

fashion. The information contained in this document is for educational, entertainment and news purposes

only, reflecting the current personal opinion of us and is NOT designed, construed or believed in any manner

to be Trading Advice. The information in this document is strictly for Educational Purposes. Past performance

is no guarantee of future results.

You hereby agree that ANY and ALL trading decisions you make are your own and reflect your own personal

level of risks and trading skills. You also acknowledge and agree that you are aware of the risk parameters

involved in trading and that the leveraged nature of Trading Futures, Equity CFDs, Options, Forex Exchange

and Spread Betting can cause losses greater than your account balance. You further agree to accept full,

complete and sole responsibility for any and all results in your trading account. There have been no promises,

guarantees or warranties suggesting that any trade will result in a profit or will not result in a loss. Opinions

are current opinions only and past results are not indicative of future results. It is your sole responsibility to

know and define the risk before trading. You also hereby agree that you will not hold us liable or responsible

in any way for any losses you incur in any trading account. We disclaim any responsibility for any adverse

consequences that might arise directly or indirectly from the use of any material contained in or from this

document or any product purchased via our site or by any contact in any form with any individual associated

with The Indicator Guys Limited.

Distribution and/or re-transmission of any of the content provided by us in any form or by any medium is

expressly prohibited.

The Indicator Guys Limited does not recommend or endorse specific transactions or trading methodologies or

any advice concerning the value of or advisability of trading Futures, Equity CFDs, Options, Forex Exchange

and Spread Betting. This service is designed to assist you and provide tools for the understanding of technical

analysis of the financial markets. This is an educational document designed solely to assist you in developing

your own personal methodology if you so desire, JUST AS FREELY AVAILABLE TECHNICAL ANALYSIS BOOKS

FROM THE LIBRARY or BOOK STORE WOULD ASSIST YOU.

Internet Trading Risks

In addition, there are risks associated with utilizing an Internet-based deal execution trading system including,

but not limited to, the failure of hardware, software, and Internet connection. Since The Indicator Guys Limited

does not control signal power, its reception or routing via Internet, configuration of your equipment or

reliability of its connection, we cannot be responsible for communication failures, distortions or delays when

trading via the Internet. Your dealer employs backup systems and contingency plans to minimize the

possibility of system failure, and trading via telephone are always available.

Disclosures and Transfers

We do not disclose personal information to third parties, except when one or more of the following conditions

is true:

* We have the individual‟s permission to make the disclosure;

* The disclosure is permitted by law or mandatory professional standards;

* The disclosure is reasonably related to the sale or other disposition of all or part of our business or assets;

* The personal information to be disclosed is publicly available;

* The party to whom the disclosure is made controls, is controlled by, or is under common control with The

Indicator Guys Limited;

* The disclosure is reasonably necessary for the establishment or maintenance of legal claims; or

* The disclosure is to persons or entities for whom we are providing services, provided the disclosure is

consistent with the purpose for which the personal information was obtained.

Copyright © 2011 – The Indicator Guys Limited



Policies

Privacy and Security Policy

The Indicator Guys‟ web site uses security measures to protect against the loss, misuse, and alteration of the

information under our control. We do not store credit card details nor do we share customer details with any

3rd parties. We store the information in a database in a secure environment at our data centre. We will never

share, sell, or rent individual personal information with anyone without your advance permission or unless

ordered by a court of law. Information submitted to us is only available to employees managing this

information for purposes of contacting you or sending you e-mails based on your requesting information.

Delivery Policy

All indicators, systems and software products purchased through our site, or otherwise, must be securely

linked to a named account on one of our partner charting platforms. This must be done before the product can

be delivered to, or installed by, the purchaser and the purchaser will not be able to operate their product

without this step having been completed first.

In order for us to securely link the product correctly as required, each customer will need to have an active

account with one of our charting platform partners. In some platforms our delivery method allows us to detect

a customer account number automatically.

However, where this is not possible a request will be sent via email, and you will need to forward your charting

platform customer account number to us. This should be sent to [email protected] along with

your name and the name of your chosen charting platform.

(e.g.) Name: Jenny Smith, Platform: TradeStation, Account ID: 123456

Once we have received this information, we can then securely link your product and deliver it to you

electronically via return of email. We aim to accomplish this within 24hours during weekdays, but please allow

longer if your request is made over a weekend or during a public holiday.

Refund / Cancellation Policy

Unless specifically stated on our website or within our sales materials, we generally do not offer refunds with

any of our products. This is mainly due to the amount of time we have to spend setting up, delivering and

supporting products during each sale, which makes it very impractical and uneconomical for us to do so.

In the event that we do offer a Money Back Guarantee with any of our products however, we will always honour

this commitment. We will aim to issue all refunds promptly, usually within 24hrs of receiving their request, but

please allow longer if your request is made over a weekend or during a public holiday.

Copyright © 2011 – The Indicator Guys Limited

mailto:[email protected]



Welcome

Congratulations on your recent indicator purchase, we hope that this indicator will become a

valuable tool in your analysis tool box and help move you closer to achieving your goal in becoming

a trading success!

This document is aimed at providing you with as much information about your recent purchase as

possible. We believe this indicator is an incredible tool and feel sure that, once you begin to

understand how it works and how it can be used to support your technical analysis, you too will see

just how invaluable it is to your trading.

If you have any comments or suggestions please send an email to [email protected]

Thank you,

-The TiG Team




Getting Started

Before you start using your new indicator, please make sure you have everything you need to trade.

This includes a compatible charting platform, brokerage and dedicated trading PC. Before you

install your new indicator, please make sure that your operating system and charting platform are

installed and running properly. Also take some time to become familiar with your charting platform.

PC Requirements

We recommend a computer with the following minimum technical specification:

CPU: 1.8 GHz Dual Core

RAM: 1GB of RAM

Hard Drive: 1GB of available hard-disk space

Monitor: Resolution of 1280x768 or greater

Operating System: Windows XP, Vista, 7

Internet: High speed reliable ISP, with an ADSL or cable modem.

Choosing a brokerage or financial spread betting company

For more information about choosing a brokerage or financial spread betting company please

contact us at [email protected].

Choosing a charting platform

For more information about choosing a charting platform or upgrading from your current platform

please contact us at [email protected].

A word of warning

At TiG we are fully aware that trading the financial markets is not always an easy task. It can be very

risky and highly stressful. The markets can do whatever they want whenever they want, meaning

there is no certainty in trading other than prices going up and down over time.

We strongly recommend that all customers first use our indicators with a practice trade account.

Most online brokerages can offer you some form of demo account. Our indicators analyze past data

in order to indicate something which has been happening in the market. There is absolutely no

guarantee that the markets will continue to produce the same results once you enter into a trade.

There are literally hundreds of books published on the psychology of trading and how the mind

works to manipulate the data that charts and indicators produce. We believe that all traders should

practice using our indicators, placing trades based on the indicators using a demo trade account,

until the trader feels happy that they can use them effectively to help them in their real trading

decisions.





Installation and Setup

TiG Easy Install

To install your newly purchased indicator in your trading platform please follow the guide below:

1. Download your indicator from the location provided by TiG.

2. Locate your newly purchased indicator on your computer and “Double-Click” the Indicator

EXE file to launch the TiG Easy Install Setup Programme.

3. If your computer gives you any security warning prompts please click accept/yes.

4. Once inside the TiG Easy Install Setup Programme. Click “Next >”.

5. Enter your TiG License Key and Click “Next >”.

6. The Setup Programme should automatically find where your trading platform was installed

on your computer. Click “Next >”.

7. The Setup Programme should automatically set up your shortcuts. Click “Next >”.

8. Now your indicator is ready to install. Click “Install”.

9. The Setup Programme will automatically Import your Indicator into your charting platform

for you. Click “Next >”.

10. Congratulations! Your new indicator was installed correctly. Click “Finish”.

Having Problems?

Please use the support site included with your purchase or email [email protected].




The TiG Linear Regression Channel (LRC) Indicator

In statistics, a Linear Regression Line is a straight line that best fits all the data points of interest,

between two points. In other words it is a mean (average) line which bisects the data points, leaving

an equal amount of data on each side of the line.

First of all, this can be useful in trading to visualise trend direction. Furthermore the line can be

used as a representation of fair value for a particular stock or trading instrument. Hence if the price

moves too far above the Linear Regression Line, this would suggest it may be a good time to sell,

whilst price moving too far below the line would suggest a good time to buy. The trick, of course,

will be in determining, “How far is too far?”

This is where a concept known as „Standard Deviation‟ comes in (don‟t panic too much!).

In the image above (widely referred to as the „BellCurve‟), µ is the mean of a random data set

(equivalent to our Linear Regression Line) and σ represents standard deviation, which is a measure

of the variance of the data set.

Without getting too involved in the statistics, what is important to know is that in such a data set

68.2% of values will be contained between µ-σ and µ+σ and 95.4% of values will be contained

between µ-2σ and µ+2σ (99.7% will also be contained between µ-3σ and µ+3σ).

Hence, if we treat a trading chart as equivalent to a random data set (more on this later), it will be

very informative to consider the Linear Regression Line and its various associated standard

deviations.

For example, if the price of an instrument at a given point in time is outside the first set of standard

deviations (µ-σ and µ+σ) there is a high probability it will return to the mean. Similarly, any price

outside the second set of standard deviations (µ-2σ and µ+2σ) will have a very high probability of

returning to the mean.

This is where the Linear Regression „Channel‟ (LRC) comes into play in trading, as it plots the mean

line along with standard deviation lines, to allow you to visualise price in accordance with the theory

outlined above.



The TiG Linear Regression Channel plots both the first and second standard deviation channels

along with the mean line so that high probability trades can be entered at the first channel lines (µ-

σ or µ+σ) and very high probability trades can be entered at the second channel lines (µ-2σ or

µ+2σ). Trades can be taken as soon as a line is touched, or as soon as the price has moved outside,

then back inside of a channel, depending on your preferred strategy.

Due to the fact that the theory of linear regression is based on the analysis of random data, the use

of a Linear Regression Channel is obviously best suited to a market that is exhibiting random

characteristics. A sideways or non-trending market for example, tends to exhibit the most random

behaviour, as it has no clear direction. A trending market on the other hand, tends to behave more

like skewed data, because there is a clear directional bias amongst its traders. For this reason the

use of a Linear Regression Channel is far better suited to a market which is sideways or non-

trending.

Both the width and the inclination of the TiG Linear Regression Channel Indicator will change in

real-time as the price data changes. You may adjust the period of time your Linear Regression

Channel references, using the „Length‟ input. This will correspond to the number of bars or candles

the indicator‟s calculations take into account. The default setting is 30 but you may experiment as

much as you like.

You can also change the colour settings to suit your preferences as with all of our indicators. The

choice of custom colours available will depend on your trading platform. ExtRight and ExtLeft can

be set to true (on) or false (off) to extend the linear regression lines either to the right or left hand

side of the chart.

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TiG Extra

As an added extra to support you, we have also produced a version of this indicator which tracks

the position of the lines historically and is very useful for back-testing purposes. It is based on a

Linear Regression „Curve‟, rather than a Linear Regression Line.

This plots both the standard deviation channels and the mean line as a continuous curve. The value

of the standard deviation which the channels represent can be adjusted in the indicator settings (eg

„1‟ for 1 standard deviation or „2‟ for 2 standard deviations from the mean). The Trades can be

taken as soon as a curve is touched, or as soon as the price has moved outside, and then back

inside of a channel, depending on your preferred strategy.

Once again, you may adjust the colours, and also the period of time your Linear Regression Channel

references, using the „Length‟ input. This will correspond to the number of candles or bars the

indicator‟s calculations take into account. The default setting is 30 but you may experiment as

much as you like.

So if you have the same length setting for this curve indicator as you do for the main LRC line

indicator, it will effectively show you the historical path that the main indicator has taken. This can

be hugely helpful in planning your trading strategy and deciding how best to use the LRC Indicator

to achieve maximum profitability.

As a final note, you could effectively trade with either one of these indicators, but we prefer to trade

with the main TiG Linear Regression Channel, as we find it keeps our charts far less cluttered than

using the curves. Ultimately though, the choice is yours.

Thank you for choosing The Indicator Guys and please enjoy trading with your TiG Linear

Regression Channel (LRC) Indicator.



Input settings for the TiG Linear Regression Channel (LRC)

At TiG we try to make all our indicators as customisable as possible. Below is some information

about what the input settings do and a quick reference guide to the indicators‟ default values.

Please use this guide if you need to reset your indicator to the default factory settings.

Name Value (defaults) Description

LongColour 0

LongColour relates to the colour of the Buy Zone Area.

ShortColour 0

ShortColour relates to the colour of the Sell Zone Area.

Length 30

The look back length can be changed from 1 to as

many bars as you have loaded into your current chart.

It sets the number of bars that the indicator will

reference before it displays.

The default value of „Length‟ is 30. It is recommended

that you use the default value when you first start

trading this indicator. Of course, you may choose to

change this value once you become more familiar

with the markets you are trading.

If you want to look at the larger trend we recommend

looking at a larger time frame (e.g. If you are placing

trades on a daily chart, we recommend looking at the

weekly chart to help further gauge the larger trend in

the market.)

ExtRight false Whether or not the LRC lines extend to the right.

ExtLeft false Whether or not the LRC lines extend to the left.



Contact Us

MORE INFORMATION

If you would like more information about

The Indicator Guys or to see more of our

products and services please visit our

website or contact us by email. We try to

respond to all enquiries within 24 hours.

Email: [email protected]

Web: http://www.theindicatorguys.com

HAVING PROBLEMS?

If you are having problems with a recent purchase

please don‟t hesitate to contact our support team via

email or simply visit our dedicated support site

where you can log a ticket or use our online support

services to solve your problem.

Email: [email protected]

Web: http://support.theindicatorguys.com


http://www.theindicatorguys.com/


http://support.theindicatorguys.com/

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