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Some time ago I go interested in Linear Regression Slope and it has been on my things to do list to do more work with it. My initial interest was spurred by this well done article available from Stocks and Commodities Magazine (Dec 2007 p.72):

http://store.traders.com/stcov257copr.html

Next link takes you to code for various platforms (including TradeStation, Ninja and Ameritrade) for the indicators that are discussed.

http://www.traders.com/Documentation/Feedbk_docs/2007/12/TradersTips/TradersTips.html

Now it’s been a while but I believe there is a problem with the Ninja code as presented by Ninja. There is extensive discussion about this on the Ninja board but the main problem is as per

http://www.ninjatrader-support.com/HelpGuideV6/helpguide.html?Slope

“The slope is a measure of the steepness of a line. This is the calculation of rise over run and not to be confused with linear regression slope.”

I set up the Ninja code to compare with the specific charts in Star’s article and they were different. Fortunately however someone did create another LRS for Ninja and it can be downloaded here:

http://www.ninjatrader-support2.com/vb/local_links.php?catid=1&sort=N&pp=15&page=8

look for title:

LinRegSlopeSFX - Linear regression slope super fast calc with option for exponential weighting

This indicator matched Stars’ charts. The chart below is at least a close match to the one Matt posted.

RSquared indicates the strength of trend. Star likes to see it crossing up over the .2 level as she goes into a trade indicating trend has been consolidating but is now increasing. LSR is used for direction.

Related is the linear regression indicator in the main pane which is actually the endpoint of a type of trendline. It computes price direction based on a the least-squares fit, which plots a straight line though the price datapoints rather than averaging the datapoints. As the direction of the market changes, the direction of the endpoint of the straight trendline changes sooner than would a moving average of the price points so it is like a cross between a moving average and a trendline. Note how much more responsive the 50 period line (black) is vs the 50 EMA (blue). I just put those for example but actually one could have done worse than follow the cross signals for the S&P! In Strategy Desk this indicator is called Time Series Forecast.