Forex Trading, particularly in studying technical indicators, we need indicators to determine trends in Forex Trading. Linear Regression can help you to understand the trend with a curve that follows price developments. The concept is the same when we use the Moving Average (MA) first period.

Linear Regression is a statistical data to predict future prices from past data, and is usually used when the price increased or decreased significantly. Linear Regression in the history of mathematics was first developed by Gauss, a mathematician who in the year 1809. Then Gilbert Raff uses these principles to trading shares first. Concepts used to calculate the cost of goods price inflation needs, it can be applied to gauge price trends based on the graph. Gilbert Raff said that he used the Regression Channel to accurately calculate price movements of stocks, bonds, mutual fund and commodity.

Formula / formula of linear regression are as follows:

Or:
x: The period of time now.
n: number of time periods

Yes, in a simple calculation of the LR, Raff change it in the form of relationship with the price are:
LR = SmoothPrice = MA (PRICE, Z)
Price: The price at this time.
Z: 1 MA period
Ket: MA: Moving Average

Function
Linear regression is a technical indicator to measure trends based on statistical methods. Parabolic shape similar to that produced by Moving Average and the methods used are also similar.

Shown in the picture above examples, graphs JAPANESE YEN  time frame. Linear indicators have been added also Regresion. Looks really similar to the MA. We can take a new position as seen through the LR price.

The method used in linear regression is:
1. Movement indicators show rising trend (bullish) or down (bearish).
2. If the price will be formed to penetrate a new trend.

If the trend of price rises or falls, the angle of the linear regression will also show the base up or down as well. When prices rise or fall we can expect higher returns from this indicator. Linear regression is a model of relationship between two variables with a linear equation. For example the equation of weight and height of a human.

Thus the same function with the Moving Average, but calculations using statistical methods. Each point is illustrated linear regression indicator will leave traces depicted as a whole in the form of curves. These indicators are useful to:
1. Predicting the future price based on current prices.
2. Determine price trends. It’s easy to apply where at LR penetrate from below and above the price there will be a bullish pattern (trend up).
3. Determinants of Support & Ressistence. The points that we mentioned as a New Trend in the previous graph can be described as this is Suppot point (lower limit price movement) and also Ressisten (upper limit of the price movement). Trading in Forex we can measure the correlation between Price (Y-) and time (X).

Excess
This indicator is very easy to use to measure the price trends. With the help of a MA line first then we can conclude that if the LR line through the price it will form a new trend.

Shortage
The nature of this indicator is Lagging or too late means that if this indicator is used alone then we do not know when prices will stop rising or fall. We recommend that you add the indicator oscillator like RSI or First Passage to anticipate this.