Volume-Supported Linear Regression Trend

The Volume-Supported Linear Regression Trend indicator utilizes the relationship between price action and volume flow to determine trend direction and the underlying strength of market movements. By analyzing linear regression slopes of price and volume across multiple timeframes, the tool identifies whether a trend is being actively supported by market participation or if it is showing signs of exhaustion.

Usage

The Usage section describes how the script can be used to interpret market trends. The indicator visualizes two primary components: a histogram for short-term trends and a continuous line for long-term trends.

• Short-Term Trend Analysis: The columns represent the short-term linear regression slope of the price. The color intensity of these columns changes based on volume support. Darker green or red columns indicate that volume is actively supporting the price movement (e.g., rising volume during an uptrend), while lighter shades suggest a lack of volume support, potentially signaling a trend reversal.
• Long-Term Trend Analysis: The thicker line represents the long-term trend. Similar to the short-term columns, its color varies based on whether the long-term volume flow is confirming the price direction.
• Divergence Spotting: Users can look for divergences between price action and the indicator. For instance, if price continues to make new highs while the indicator's peaks are declining, it suggests that the volume support for the uptrend is weakening.

Details

The script operates by calculating the linear regression slope for both price and volume components. It partitions volume into "buy" and "sell" pressure based on candle geometry (wicks and body size).

1. Price Slope: It calculates the difference between the current linear regression value and the previous one. This identifies the current trajectory of price.
2. Volume Pressure: The script calculates "Delta Up" and "Delta Down" volume by looking at how much of the volume occurred in the upper wick, lower wick, and body of the candle relative to its close.
3. Support Calculation: The script then compares the slope of the price against the slopes of the buy and sell volume components. If the price is rising and the buy volume slope is positive and greater than the sell volume slope, the trend is considered well-supported.

Settings

• Source: Determines the price data used for the linear regression calculations (default is Close).
• Short Term Length: The lookback period used for the short-term trend histogram (default is 20).
• Long Term Length: The lookback period used for the long-term trend line (default is 50).
• Column Colors: A group of settings that allows users to customize the three shades of green (bullish) and red (bearish) used for the short-term histogram.
• Line Colors: A group of settings for the colors of the long-term trend line, reflecting high, medium, and low volume support.

FAQ

How do I interpret the different colors in the histogram? Darker colors indicate strong volume support in the direction of the trend. Medium shades indicate moderate support, while the lightest shades indicate that the volume slope is not confirming the price slope, which may suggest a weakening trend.

Can this indicator be used for mean reversion? Yes. When price continues to move in one direction but the indicator shows light-colored columns or a flattening line, it suggests that the trend lacks participation, which often precedes a mean reversion move.

How do I get access to the Volume-Supported Linear Regression Trend? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.