Regression R-Squared

A Technical indicator based on linear regression. The R-Squared values show the percentage of movement that can be explained by linear regression. Linear regression is a statistical tool used to predict the future from past data.

Why should I use it?

The Regression R-Squared indicator can tell you how strong a trend is at any moment.
This indicator is best used as a confirmation tool, since it does not tell you what is the trend's direction is, but rather shows its strength (in other words how reliable the trend is at the time).
You can combine the Regression R-squared indicator with any other indicator that is used for spotting a trend's direction (like the Linear Regression slope indicator or a Moving Average).
Doing so will able you to spot the trend's direction, and measure its strength using the Regression R-squared, a powerful combination which can help you to choose the right trade.

How does it look like?

The R-Squared indicator will be drawn as a single line under the market price.
It can have any value between 0 and 1.
(Notice that even when the market is in a down trend, the R-squared will have positive values indicating how strong this trend is, it does not indicate the trend's current direction).

How does it work?

Once again, technical analysis is using a complex tool to analyze the market, but the result on the charts is extremely easy and simple to understand.
The Higher the R-Squared indicator line rise, the stronger the trend is.
The lower the R-Squared indicator line drops, the weaker the trend is.
High R-Squared values are considered usually from 0.6 and above.
When the value of the R-squared is close to 0, it indicates the trend has no power at all, or that there is no trend in the market at the time.

Example

In the first half of this chart the market is trending very strongly to the down side, in the second half of the chart the market is not trending at all. Notice how in the first half the R-Squared is moving clearly above 0.6 indicating a strong trend, and in the second half of the chart the R-Squared is dropping below 0.6 and moving closer to the 0 value, indicating the market is lucked in a range (not trending).