Risk Disclosure

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. View full risk disclosure.

Regression Channel Position Solver


The Regression Channel Position solver analyzes the relative position of price to the Regression Channel lines.  The Regression Channel is divided into 6 zones (A-F).  4 zones are inside the channel, and 2 zones are outside the channel.  Output Zones for the Long side start above the Upper channel line with Zone A and descend.  Output Zones for the Short side start below the Lower channel line with Zone A and ascend.  See the examples below for a visual explanation.

Parameters

This section is common to all solvers.  A description can be found here.
This section is common to all solvers.  A description can be found here.

Channel Parameters

The period of the Regression Channel.

The width of the Regression Channel.

Output

Sets the solver’s Long output value when price is equal or above the Upper channel line.  Sets the solver’s Short output value when price is equal or below the Lower channel line.

Sets the solver’s Long output value when price is equal or greater than the upper quarter channel line to the Upper channel line.  Sets the solver’s Short output value when price is equal or less than the lower quarter channel line to the Lower channel line.

Sets the solver’s Long output value when price is equal or greater than the Middle line to the upper quarter channel line.  Sets the solver’s Short output value when price is equal or less than the Middle line to the lower quarter channel line.

Sets the solver’s Long output value when price is equal or less than the Middle line to the lower quarter channel line.  Sets the solver’s Short output value when price is equal or greater than the Middle line to the upper quarter channel line.

Sets the solver’s Long output value when price is equal or less than the lower quarter channel line to the Lower channel line.  Sets the solver’s Short output value when price is equal or greater than the upper quarter line to the Upper channel line.

Sets the solver’s Long output value when price is equal or below the Lower channel line.  Sets the solver’s Short output value when price is equal or above the Upper channel line.

 

Video Tutorial

This video is from our weekly Workshop on Aug 22nd, 2012.
For more benefit please watch in full screen mode, as this video is recorded in HD.


Examples


Example 1A: The Basics

This demonstrates the basic function of the Regression Channel Position solver, and how Long & Short Output Zones are inverted. When Zone B is set to 1 and price is between the upper quarter line and Upper channel line the Long output is 1. The reverse is true for the Short side, because the Output Zones are inverted. Therefore when price is between the lower quarter line and Lower channel line (Zone B for the Short side) the Short output is 1.

  • Add the Regression Channel Position solver
  • Set Output Zone A & B to 1
  • Set Output Zone C, D, E, & F to 0

As seen in the left chart, when price enters the Long Output Zone B the solver outputs 1 to the Long side. In the right hand chart you will notice that the Zones are reversed. Thus, when price enters the Short Output Zone B the solver outputs 1 to the Short side.

This second part will illustrate using the lower portion of the Output Zones.

  • Add the Regression Channel Position solver
  • Set Output Zone B, C, & D to 0

As seen in the left chart, when price enters the Long Output Zone E the solver outputs 1 to the Long side. In the right chart, when price enters the Short Output Zone E the solver outputs 1 to the Short side.

Example 2: Channel Entry & Exit

In this example we will generate a Long signal when price is near the bottom channel line and the channel is sloping up, also a Short signal when price is near the upper channel line and the channel is sloping down.

  • Add the Regression Channel Position solver, and use the setting as shown above
  • Add the Indicator Threshold solver
  • Set Thresholds A & B to 0.35
  • Set Thresholds C & D to -0.35
  • Set Long Output: At A to 1
  • Set Short Output: At D to 1

Below we see two charts side by side, demonstrating the minimum slope requirement of the Regression Channel for a Long & Short output that the Indicator Threshold provides.  Note that the Regression Channel Position solver is not checked for this image.

With the Regression Channel Position solver checked, the charts below show signals when the minimum slope is obtained and price is near one of the outer channel lines.