- R-Squared
R-Squared shows the correlation between the closing price and the line of linear regression
It is used as an indicator of strength of the existing trend.
Perfect correlation - 1.0
Correlation does not exist - 0.0
Within this limit indicator guarantees 95 percent accuracy.
The fall of the R-Squared index below the critical value, after reaching the extreme values, is a sign of the weakening of the dominant trends and opportunities for open positions in a direction opposite to the trend line defined by linear regression.
R-Squared is opportune to use in combination with the Linear Regression Slope indicator.
R-Squared for the determination of power and Linear Regression Slope for determining the direction of the trend.
Described in BookTechnical Analysis from A to Z, By Steven Achelis.
The indicator was revised and updated