Linear Reg Intercept and Linear Reg R2_Aliyah Khairunnisa_200101511013.pptx

REGRESI LINEAR

1. http://www.free-powerpoint-templates-design.com Linear Reg Intercept and Linear Reg R2 Lecture b y : Dr. Hisyam Ihsan , M.Sc

2. ALIYAH KHAIRUNNISA 200101511013 ICP 2020

3. Background Stock exchanges or stock exchanges are places where investors buy and sell stocks or other securities. On the stock exchange, stock prices often fluctuate and are difficult to predict. Therefore, investors often use technical analysis tools such as the intercept linear regression and R2 linear regression indicators to help understand and predict stock price movements. The regression linear intercept is the point where the regression line interceptes the y-axis on the stock price chart. It shows the expected stock price if the independent variables (factors that affect the stock price) are zero. In the context of stocks, intercept linear regression can be used to estimate stock prices at a certain time in the future if the factors that affect stock prices remain the same. The Linear Regression Indicator R2, also known as the coefficient of determination, is a measure of the accuracy of a linear regression model. R2 is the ratio of total variation in the data explained by the linear regression model. R2 can be between 0 and 1, where a value of 1 indicates that the linear regression model perfectly explains the variation in the data.

4. LINEAR REG INTERCEPT

5. Definition of Linear Reg Intercept 01 Linear Reg Intercept Indicator Formula 02 Attaching the Linear Reg Intercept Indicator to the Chart 03 Features of Linear Reg Intercept Indicator 04 05 06 Advantages and Disanvantages of the Linear Reg Intercept Indicator Trading Strategy for the Linear Reg Intercept Indicator List of Contents

6. Definition of Linear Reg Intercept The Linear Regression Intercept indicator is one type of indicator which is once again calculated using the Linear Regression technique or LR, the same as the Linear Reg Forecast Indicator. Thatstatistical toolhelps traders to predict the future value of assets. You can use this tool as a quantitative way to identify underlying trends and overpriced prices. For each data point, the indicator plots the intercept for the trend line.

7. Linear Reg Intercept Indicator Formula Linear Regression Intercept is an indicator that is calculated using linear regression techniques and features. LRI (Linear Regression Intercept) is obtained by calculating the LRI and, completing the intercept value/price at the first point x. Here, X = 0. LR denotes the value of Y (generally price) while the value of X (time series) is 0.   In short, LRI is calculated as y = a + bx   where, y = price for each date x a = intercept (or constant, where x is 0) b = slope of the regression line x = date for each value

8. Attaching the Linear Reg Intercept Indicator to the Chart Zerodha's kite At Zerodha Kite the LR Intercept Indicator comes in the shortened form of Linear Reg Intercept Indicator. It can be attached to the chart from the STUDY section. The default parameter of this indicator is 14. See image below on how we add the indicator on the daily chart The Dependency Industry .

9. You can use this Reg Linear Intercept Indicator together with LR lines on the same chart, see image below on how we add lines toCrude oilhourly chart. You can also add LR lines by clicking the drawing pencil icon in the upper-right corner of the graph and selecting Regression Linesfrom the Image drop-down.

10. Upstox Pro To frame the LRI indicator, first open the Upstox Pro charting platform, then add your favorite script there. After that, customize it according to your needs and click on the Apply button.

11. Features of Linear Reg Intercept Indicator The linear regression intercept along with the slope creates the LR line. The LRI indicator can also be used to evaluate the performance of a stock or fund with an index or market. This indicator shows the first and initial value of the regression line. Technical analysts can use the indicator's calculations to backtest assumptions, as well as intercept them calculated against actual historical price values. This Linear Regression Intercept indicator may be useful as a confirmation of assumptions and identified pattern . For example, when using a capital asset pricing model, traders can use this indicator to evaluate the performance of a stock or fund with an index or market. This will help in showing how much better or worse a stock or fund is than the CAPM (capital asset pricing model) predicts. If the client breaks the linear regression equation into two parts, one part is the intercept and the other is the intercept price movement market. Regression explains this market price movement.

12. Trading Strategy for the Linear Reg Intercept Indicator If you put the LRF and LRI indicators together, they act exactly like the MA (moving average) but faster than that. Let's take a look at the image below. Look at the picture, here the pink line is LRI and the blue is LRF. As you can see during bullish price movements, the LRI is below the LRF. And, in a bearish market, the LRI is above the LRF. You can apply it to short term moves, as it works best for that. Like, here, I've taken a timeout of 1 hour.

13. Advantages and Disanvantages of the Linear Reg Intercept Indicator Advantages: Indicates the trend: The linear intercept regression indicator can help in identifying the trend of the stock market as a whole. If the regression line has a positive intercept, then the stock market trend is said to be strengthening. Conversely, if the regression line has a negative intercept, then the stock market trend is said to be weakening. Clarify reversal signals: Using intercepts in linear regression analysis can help identify when the stock market is about to change direction. For example, when the regression line moves from a positive to a negative intercept, it can be considered as a signal of a reversal in the direction of the stock market. Indicates the overall market trend: The intercept linear regression indicator can assist traders and investors in identifying the overall stock market trend. In technical analysis, market trends are considered an important factor because they can provide clues about the direction of stock price movements in the future . Easy to understand: The concepts of regression lines and intercepts are relatively easy to understand and apply to technical analysis. In technical analysis, most indicators require the use of complex mathematical formulas that are difficult for some traders and investors to understand. However, the intercept regression linear indicator only requires simple calculations to produce a regression line graph Clarify trend direction: In some cases, regression lines can help in clarifying the trend direction of the stock market. For example, if the regression line has a steep angle and indicates a strong bullish trend, then traders and investors may make a buy decision. Conversely, if the regression line shows a strong bearish trend, then traders and investors may consider selling shares.

14. Disadvantages : Non-specific: The linear intercept regression indicator can provide an overview of stock market trends, but does not provide specific information about individual stock price movements. Therefore, it may not be the best indicator to use in technical analysis . Susceptible to change: The linear regression intercept indicator can be susceptible to rapid changes in the stock market, especially in volatile market conditions. Under such conditions, the regression line can change drastically and lead to wrong interpretation . Not specific to a particular stock: The linear regression intercept indicator tends to give a general idea of ​​stock market trends. However, this indicator does not provide specific information about individual stock price movements or certain groups of stocks. Therefore, this indicator may not be suitable for use alone in technical analysis . Inaccurate in volatile conditions: The regression line can be inaccurate in highly volatile or unstable stock market conditions. This condition can cause the regression line to become unstable and unreliable for identifying stock market trends. Under these conditions, traders and investors should consider using other indicators that are more suitable for volatile market conditions . Does not work well in sideways conditions: The linear intercept regression indicator is less effective in identifying stock market trends that are trapped in sideways conditions or price movements that move within a certain range. These market conditions can produce flat regression lines and do not provide a clear indication of the direction of the stock market trend.

15. LINEAR REG R2

16. Linear Reg R2 01 What is the Function of the R2 Linear Regression Indicator? 02 How to set Linear Regression R2 Indicator on Charts? 03 Advanced Trading Strategy of Linear Regression R2 Indicator 04 05 06 Advantages and Disanvantages of the Linear Reg R2 Indicator How to use R2 Linear Regression Indicator? 08 07 Combine with the Oscillator Pros and Cons of Linear Regression R2 Indicator List of Contents

17. Linear Reg R2 The Linear Regression R2 indicator is used to determine the strength of a dominant market trend. The indicator also follows the Linear Regression technique. We have seen the use of Linear Regression inApproximate typeand also inIntercept versionof indicators. The LR R2 indicator is used to determine the intensity of rising or falling market trends. It provides a means of measuring trend strength. So, let's start with the indicator function first.

18. What is the Function of the R2 Linear Regression Indicator? The Linear Regression indicator function R2 determines the extent to which a value is linearly related to time. There, the price moves closely in a linear relationship with the passage of time and the stronger the trend is. In a period, this indicator showstrend strength. The Linear Regression R2 indicator measures the extent to which a security's movement can be explained by linear regression. We know that a trend doesn't always go in one direction. At any given time, the trend will run out. To determine it you can use Linear Regression R2. If you have a 95% confidence level, the trend is statistically significant for the linear regression line over a given period. So, if the R-squared reading is below the 95% confidence level for a given period, there is no statistically significant trend.

19. How to set Linear Regression R2 Indicator on Charts? Zerodha's kite In Zerodha Kite this indicator is Linear Reg R2. It is available under the STUDY section and can be attached to a chart as shown below in the example The Dependency Industry . Here we attach indicators to an intraday trading chart. As you can see in the image above in Zerodha Kite, the default parameter of the Linear Reg R2 indicator is 14 and the indicator is plotted on CLOSE value . But you can change the parameters if you like and also calculate values ​​in other fields like OPEN, HIGH, LOW etc. The Linear Regression R2 indicator is very useful as a reinforcing indicator.

20. Upstox Pro To set LRR2 on Upstox Pro , start by opening one of the charts of your choice. Then open the indicators section. After that, find the indicator and apply it.

21. How to use R2 Linear Regression Indicator? Linear Regression tries to determine the strength of the trend. if the price moves in a straight line, it indicates a strong trend. Any trend doesn't go in one direction forever. There are certain times when the trend will run out and reverse direction or pullback. In momentum indicators and moving average , there is a need to validate trends to be persistently effective. One can use LR R2 with Incline indicator and The slopes show overall market trend – i.e. positive or negative, and R-Squared shows its strength. This indicator is invaluable as a confirmation indicator. Momentum indicators like Stochastic , RSI , CCI ,etc , and moving average indicators require trend validation to be reliably useful. This Linear Reg R2 indicator offers a way to show the intensity of a price trend. One full cycle shows rally in one direction. You can use indicators to determine the strength of the trend and it oscillates between 0 and 1. The trend is strong when LRR2 is high and weak when it is low.

22. Advanced Trading Strategy of Linear Regression R2 Indicator One thing is important, a high r-squared value accompanied by a small slope may not interest short-term traders. And, a high r-squared value accompanied by a large slope value may be very attractive. Now, I'm going to show you another example of an advanced strategy Here, I've combined the Linear Regression Intercept and R2 to get more details. On intercept point with the price, enter the trade and exit the same way. It helps to ignore the extra sound from the indicators.

23. Combine with the Oscillator Here, another approach that combines R-Squared with an oscillator. In this case, a signal will be produced according to the reading of the intermediate oscillator overbought and oversold level. And, the R-Squared should remain at a low level (usually below the 95% confidence level, indicating that the market's behavior is "less trendy").

24. Pros and Cons of Linear Regression R2 Indicator Linear Reg R2 can be used as a confirming indicator and also has predictive value. you canuse this with other indicators to identify possible entry and exit level . Also, it uses the best-fit least squares technique, no delays unlike moving averages. Traders can use these indicators to determine the level of confidence and efficiency of Linear Regression calculations. Indicators can sometimes give false positive signals, because a high confidence score does not always mean that the price movement is 100% likely to be in line with the calculated regression line.

25. Advantages : Easy to understand: R2 is quite easy to understand because the result is expressed as a percentage. This makes it easier for investors to understand how well the regression model can explain the variation in the data. Indicates the level of accuracy of the model: The higher the value of R2, the more accurate the regression model is in explaining the variation in the data. Therefore, a high R2 value can give investors confidence that the regression model can be relied upon in predicting future stock price movements. Measures the relationship between variables: R2 can provide information about how strong the relationship is between the independent and dependent variables in the regression model. This can help investors to understand how changes in one variable can affect other variables. Facilitates comparison between models: In stock exchange analysis, investors often compare multiple regression models before deciding on the most suitable model for investment reference. In this case, R2 can be used as a comparison criterion between models. The higher the R2 value, the better the regression model is at explaining the variation in the data. Advantages and Disanvantages of the Linear Reg R2 Indicator

26. Disadvantages : Does not measure returns or risks: R2 only measures how well the regression model can account for the variation in the data, but does not provide information about the returns or risks investors may face. Therefore, investors should not rely solely on the value of R2 to make investment decisions. Susceptible to overfitting: The value of R2 may increase if the regression model is too complex and "overfitting" the training data. This can cause the regression model to be unreliable when applied to unknown data. Therefore, it is important to carry out good model validation before relying on R2 to make investment decisions. Does not consider other factors affecting stock prices: R2 only measures how well the regression model can explain the variation in the data collected. However, there are other factors that can affect stock price movements that cannot be explained by the regression model. Therefore, the value of R2 should not be used as the only factor in making investment decisions. Unable to measure the impact of unexpected events: Sometimes, unforeseen events such as financial crises or natural disasters can affect stock price movements. R2 cannot predict the impact of these events. Therefore, investors must consider other external factors in making investment decisions. Not suitable for data that is not normally distributed: R2 is based on the assumption that the data is normally distributed. If the data is not normally distributed, then the value of R2 may not be an accurate measure of how well the regression model is explaining the variation in the data.

27. Conclusion   In conclusion, the linear intercept regression indicator can provide a general view of stock market trends and help identify reversal signals. However, this indicator is not specific to certain stocks, is not accurate in volatile conditions, and does not work well in sideways conditions. Therefore, traders and investors should consider using other indicators that are more suitable for certain market conditions. In conclusion, R2 can provide useful information in stock exchange analysis, but it also has drawbacks that must be considered. Therefore, investors should use R2 as a tool in investment analysis, and not rely on it completely in making investment decisions. In addition, investors must take other external factors into account and perform a fundamental analysis on the desired stock before making an accurate investment decision.

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