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.
Past performance is no guarantee of future performance.