Line marks the upper boundary of a trend Lower Line marks the lower boundary of a trend Median Line marks the midpoint of the trend There are two types. The image above is the 4 hour chart of the EUR/USD for May-June, 2016. You can do this by going to the top of the MT4 window, then clicking on Insert Channels Linear Regression. Stop Loss on a Linear Regression Trade You should always use a stop loss order when trading a Linear Regression based strategy. It draws the midpoint of the trend. Lower Linear Regression Line, the lower Linear Regression Channel line marks the bottoms of a trend.
This is shown by the bitcoin xmas sweater top arrow. In this third case the median line saved us from a losing trade. At the same time, we see a Pin Bar formation, followed by a second breakout below the Regression line. The trade exit strategy that you employ with a linear regression channel will be based on your own preference and comfort level. But in any case, you will find the Regression Channel indicator built into most Forex trading platforms including MetaTrader. Each time that the price interacts with the upper or the lower line, we should expect to see a potential turning point on the chart. The price increases through the median line, creates a swing in the median area and then expands to the upper level of the indicator. The chart above illustrates a bullish Linear Regression Channel. Depending on where you had placed your stop loss, your first breakout trade may or may not have been profitable, however, on the second breakout, if you had placed a sell order below the breakout point and a stop loss above the Pin Bar high. Forex Linear Regression Trading System Now lets discuss how you can create a rule based Forex Linear Regression trading system, which will help you to plan out and execute your trades more effectively.