RegressionDivergence

Description

The Regression Divergence study is a correlation analysis technique proposed by Markos Katsanos. This indicator uses linear regression of the rate of change of two symbols to statistically forecast a price and then subtracts the actual price from it. The results are normalized on the scale from zero to 100.

In order to analyze the values of the indicator, two horizontal plots can be used. By default, these are fixed at levels of 75 and 25. Indicator peaking at the upper level might be interpreted as a buy signal. When the values start rising above the lower level after reaching a bottom, a sell signal can be recorded.

Input Parameters

Parameter

Description

secondary symbol

Defines the symbol with which the current symbol's divergence is calculated.

roc length

Defines the period over which the rate of change is calculated.

divergence length

Defines the period over which the linear regression is calculated.

divergence momentum length

Defines the time offset (in bars) for the calculation of the forecast price.

level1

Defines the higher of the reference levels.

level2

Defines the lower of the reference levels.

Plots

Plot

Description

RegressionDivergence

The Regression Divergence plot.

Level1

The higher of the reference levels.

Level2

The lower of the reference levels.

Further Reading

1. "Trading The Nikkei" by Markos Katsanos. Technical Analysis of Stocks & Commodities, July 2017.

Example*

*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.

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