"We have an unknown distance yet to run, an unknown river to explore. What falls there are, we know not; what rocks beset the channel, we know not; what walls ride over the river, we know not. Ah, well! we may conjecture many things."
 John Wesley Powell
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In this post and the associated video, I walk through how I use the Linear Regression Channel Indicator in one of my own day trading setups. The approach is fairly simple and straightforward which helps explain why a video made several years ago is still relevant today.

That's the promise of simple trading... it's robust.

The Linear Regression Channel is a three-line technical indicator, which outlines the high, the low, and the middle of a trend or price move being analyzed. It's a statistical tool used to contextualize the present/"predict" the future from past price data. It is most often used to determine if near-term prices might be overextended.

The indicator was developed by Gilbert Raff, and is sometimes referred to as the Raff Regression Channel. The Linear Regression Channel indicator is typically used to analyze the upper and lower limits of an existing trend. Used properly, the LRC helps traders find optimal entry and exit points within context on price charts.

Structure of the Linear Regression Channel Indicator -- The Linear Regression Channel indicator consists of three parallel lines – the upper line, lower line and the median line.




Upper Linear Regression Line -- The upper Linear Regression Channel line marks the tops of a trend. It is built by going through the most projecting top on the chart. The lower and median line will be parallel to this upper line. 

Lower Linear Regression Line -- The lower Linear Regression Channel line marks the bottoms of a trend. It is built by going through the most projecting bottom on the chart. The upper and median line will be parallel to this lower line. 

Median Linear Regression Line -- The median line is the base of the Linear Regression Channel indicator. It draws the midpoint of the trend. The upper and lower lines are evenly distanced from this middle line.