Linear Regression Moving Average from Weighted and Simple Averages

Summary

The document explains a linear regression moving average (LRMA) constructed from two smoothed versions of a price series: a linearly weighted moving average and a simple moving average. It combines them by multiplying the weighted average by three and subtracting twice the simple average. The supplied implementation uses a 14-bar period and applies the calculation to the current bar's price value.

The indicator is presented as a trend-reading aid: price above the line is interpreted as upward direction, and price below it as downward direction. The example code shows how to accumulate the period's prices, weight more recent observations more heavily, normalize the weighted sum, and form the final line. This is an indicator description rather than a tested trading system; the document provides no backtest, entry or exit rules, transaction-cost assumptions, or evidence that the above/below interpretation predicts returns. Its usefulness depends on price input, period choice, and implementation details.

Key ideas

• LRMA combines a linearly weighted average with a simple average using a three-to-minus-two weighting formula.
• The example uses a 14-bar lookback and calculates from the current price series.
• Price above the indicator is described as upward direction, while price below suggests downward direction.
• The document supplies an implementation example but no performance testing or complete trading rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.