Polynomial Regression Channel Analysis for Ninjatrader
Hello Traders, The topic for today is the PRC ( Polynomial Regression Channel ). What is, and how can be used the PRC ? There are hundreds of sites, mostly mathematical sites where we can get a lot of info about it. This is a brief summary : When we have a series of data points ( price bars ) and we want to find a formula that best fits all points of the analyzed data set, we can use a linear regression : Where Y = a.X + b ( picture from wikipedia ) and it represent all the data points by a straight line. This is the more elemental and easy to calculate... but with more error. If we increase the degree of the polynomial to 2, then we get a parabola ; Where Y = a.X 2 + b.X + c ( charts generated with arachnoid page ) This kind of polynomial is always predicting a turning point ( polynomials with odd degree ( 1, 3, 5, etc ) will have the starting point and ending point with same trend ) So, for trading analysis, most people us...