Stockworm - Manual > Linear Regression Channel

Linear Regression Channels represent a method for computing a mean line which forms the best fit to a given set of data points and two parallel lines above and below the mean line which provide resistance and support respectively. Multiple regression channels are drawn because the high or low price may break the trend of the previous regression channel over the course of time. Stockworm supplies three kinds of channels.

Raff Regression Channel - Breakout

The Raff Channel is a set of channels which result when linear regression is applied to the closing price between a low in the price data and a high in the price data. Parallel lines to the regression line are drawn to indicate the position of significant highs and lows.

The Raff Regression Channel is started using the first 'n' points in a chart to construct a baseline channel. The baseline channel is extended until the price breaks out of the channel and then a new channel computation begins. The channel computation requires one parameter: the time period for the least squares fit.

Standard Regression Channel - Breakout

The Breakout Standard Regression Channel is constructed by drawing the linear regression line with the addition of lines located a user-defined number of standard deviations above and below the regression line.

The Breakout Standard Regression Channel is started using the first 'n' points in a chart to construct a baseline channel. The baseline channel is extended until the price breaks out of the channel and then a new channel computation begins. This channel computation requires two parameters: the time period for the least squares fit and the number of standard deviations above and below the fit line to plot.

Standard Regression Channel - Classic

The Classic Standard Regression Channel is like the Breakout Standard Regression Channel except the least squares fit and the channel lines are computed using all of the data in the current plot. This indicator only requires one parameter: the number of standard deviations above and below the fit line to plot.