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R – Squared indicato

by Dr.Hamdi Boukamcha

Name:
R – Squared indicator [ ru ]
Author: melihonurs (2007.11.14 13:13)
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R - Squared indicato   r-squared.mq4 (4.1 Kb) View
r-squared shows the correlation with its linear regression line

values close to 1.0 show perfect relation
values close to 0.0 show poor relation

See Metastock Help
To determine if the trend is statistically significant for a given x-period linear regression line,
plot the r-squared indicator and refer to the following table.  This table shows the values of
r-squared required for a 95% confidence level at various time periods.  If the r-squared value
is less than the critical values shown, you should assume that prices show no statistically
significant trend.
Number ofPeriods r-squaredCritical Value(95%confidence)
5                 0.77
10                0.40
14                0.27
20                0.20
25                0.16
30                0.13
50                0.08
60                0.06
120               0.03
You may even consider opening a short-term position opposite the prevailing trend when you
observe r-squared rounding off at extreme levels.  For example, if the slope is positive and
r-squared is above 0.80 and begins to turn down, you may consider selling or opening a short position.
There are numerous ways to use the linear regression outputs of r-squared and Slope in trading
systems.  For more detailed coverage, refer to the book The New Technical Trader by Tushar Chande
and Stanley Kroll.

1 comment  To post a new comment, please log in or register

Great, I was just going to code a linear regression myself.
However, I found to mistakes in the code, but they’ll only become obvious when looking at the slope.
I changed the regression iteration to:

for (i=0; i<=per-1; i++) {
x = per – i;

This first line was modified to get display rSquare at the correct bar
The second modification is a correction for the fact that MT4 counts the bars back. In the original code X1 is linked to Yn etc. But this only affects the slope calculation

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