How to Make Up to $300 a Day with the Linear Regression Trading Strategy.

What is the Linear Regression Trading Strategy?

The Linear Regression Trading Strategy is a trading technique that capitalizes on linear regression lines and linear regression channels.

Linear regression lines are lines drawn from a price swing to another, according to the least square method.

That way, a line of best fit which cuts through the middle of price action is produced.

On the other hand, linear regression channels are channels formed by lines parallel to and two standard deviations away from each side of the linear regression line.

The linear regression line, therefore, becomes the basis around which a linear regression channel is founded.

The linear regression channel is formed using standard deviation from the linear regression line and can thus be called a standard deviation channel.

The channel is used as a measure of market volatility and thus a trading strategy can be formulated around it to profit from the market volatility.

The Linear Regression Trading Strategy uses linear regression channels to spot trends that are about to accelerate.

A trader can then place trades in the direction of the trend acceleration to profit from it.

Initially, the linear regression trading strategy was meant for quick trades in options trading.

However, it can be extended to other instruments and used to generate profits.

In the other instruments though, the aspect of quick trades still remains as trades should never last more than 7 candlesticks since entry.

Wondering how to make big money using quick trades?

In today’s post, I will teach you how to make up to $300 a day with the linear regression trading strategy.

Making Up to $300 a Day with the Linear Regression Trading Strategy.

So far, you understand the basics of the linear regression trading strategy such as the linear regression line and channel.

You might be wondering how you can then use the strategy to pull some money from the markets on a daily basis, preferably up to $300, right?

There are two ways you can use the linear regression trading strategy to make up to $300 a day:

• Aggressive Trading.
• Conservative Trading.

A. Aggressive Trading.

With aggressive trading, you enter the market in the direction of the trend as it pushes to new trend extremes.

It is a matter of buying at overbought levels and selling at oversold levels.

Here are the steps to an aggressive Linear Regression Trading Strategy:

1. Establish the General Market Trend Using Price Action.

The first thing to do is to observe the price action in order to spot swing highs and swing lows.

It is these swing highs and swing lows which you will use to anchor your linear regression channel.

An up general market trend forms higher swing highs and higher swing lows as well.

On the other hand, a down general market trend forms lower swing highs and lower swing lows too.

Just observe how the market behaves as regards the formation of swings and take note because it will help in the next step.

2. Apply the Linear Regression Channel Drawing Tool.

Most technical charting platforms such as TradingView have the linear regression channel drawing tool.

You just have to apply the tool and select two pivot points to anchor the linear regression channel.

The tool calculates and captures data between the selected pivots.

On TradingView, you will find the linear regression channel drawing tool under Trend Line Tools.

Locate it there and click on it.

Let us rewind to the previous step where you were to establish the general trend of the market using price action.

You resorted to an upward general trend where the market was forming higher highs and lows and a downward general trend where it was forming lower highs and lows.

If the market is on a general uptrend, click on the linear regression channel drawing tool.

After doing so, select one prominent swing low as the starting point, then another significant swing low ahead of the first, as the endpoint of the channel.

An upward sloping linear regression channel will result.

If the market is in a general downtrend instead, click on the linear regression channel drawing tool.

You will then select one prominent swing high as the starting point, then another significant swing high ahead of the first, as the endpoint of the channel.

A downward sloping linear regression channel will be the result.

Done that?

Proceed to the next step.

3. Look for a Signal.

After establishing the general trend and drawing a linear regression channel, what remains is to look for a viable trading signal.

The signal here is when the price closes above or below the channel for two consecutive candlesticks.

For an upward sloping linear regression channel drawn on an uptrend, you are waiting for the price to close above the upper line of the channel for two candlesticks following each other.

For a downward sloping linear regression channel on a downtrend, on the contrary, you are waiting for the price to close below the lower line of the channel for two consecutive candlesticks.

If such a condition is met, then you have a signal and can proceed to set up limit orders.

4. Set Up a Buy or Sell Limit Order.

A limit order means that you want to enter the market when it comes to the desired level before reversing in the opposite direction.

You set a buy limit order to enter a trade if the market trades low enough to a desired low level before reversing upwards.

On the flip side, you set a sell limit order to enter a trade if the market trades high enough to a desired high level before reversing downwards.

If two consecutive candlesticks close above the upward sloping linear regression channel on an uptrend, set up a buy limit order at the upper line of the channel.

That way, if the price falls back to the upper line of the channel and retests it successfully, then such trade will be profitable.

Conversely, if two consecutive candlesticks close below the downward sloping linear regression channel on a downtrend, set up a sell limit order at the lower line of the channel.

That way, if the price rises back to the lower line of the channel and retests it successfully, then such trade will be profitable.

5. Exit Trade.

The trade can fail especially where opposing forces apply.

A confirmed bullish signal may be forced to fail if it coincides with a resistance level while a confirmed bearish signal may be forced to fail if it coincides with a support level.

Beware to watch out for such opposing forces but where you cannot perceive them, then a protective Stop Loss will help.

The Stop Loss for the buy limit order can be just below the trigger candlestick, one which confirms the level retest.

On the flip side, the Stop Loss for the sell limit order can be just above the trigger candlestick.

Take Profit in both buy and sell positions strictly after 7 candlesticks.

This is a quick trend trading strategy and so your exposure to the markets is limited.

B. Conservative Trading.

For those traders uncomfortable with the aggressive trading version of linear regression trading strategy, there is a conservative version.

Here, you use the linear regression channel to trade pullbacks.

That shows how dynamic and versatile the linear regression trading strategy can be.

Here are the steps to a conservative Linear Regression Trading Strategy:

1. Establish the General Market Trend Using Price Action.

This step is exactly the same as what was done in aggressive trading.

Observe the price action for higher highs and lows to resort to a general uptrend, as well as lower highs and lows to conclude a general downtrend.

2. Apply the Linear Regression Channel Drawing Tool.

Everything in this step is still as we did in aggressive trading. There is nothing new to do.

If the market is on a general uptrend, click on the linear regression channel drawing tool.

After doing so, select one prominent swing low as the starting point, then another significant swing low ahead of the first, as the endpoint of the channel.

An upward sloping linear regression channel will result.

If the market is in a general downtrend instead, click on the linear regression channel drawing tool.

You will then select one prominent swing high as the starting point, then another significant swing high ahead of the first, as the endpoint of the channel.

A downward sloping linear regression channel will be the result.

3. Allow the Price to Retrace.

This conservative trading strategy is based on pullback trading.

That way, you will be buying low or selling high with a high win probability.

For an upward sloping linear regression channel drawn on an uptrend, you are waiting for the price to retrace downwards to the lower line of the channel.

For a downward sloping linear regression channel drawn on a downtrend, however, you are waiting for the price to retrace upwards to the upper line of the channel.

If the retracement happens accordingly, then just wait for a retest of the upper or lower bound of the channel before you proceed to entry.

That way, you will have confirmed the signal.

4. Enter Buy or Sell Positions.

Uptrend + Upward Sloping Linear Regression Channel + Downward Pullback to Lower Line of the Channel + Successful Retest = Buy Position.

Downtrend + Downward Sloping Linear Regression Channel + Upward Pullback to Upper Line of the Channel + Successful Retest = Sell Position.

5. Exit Trade.

Unprecedented things do happen in the markets.

Place a Stop Loss for the buy position just below the retest candlestick and just above the retest candlestick for the sell position.

For the buy position, take profit at the upper line of the channel and for the sell position, take profit at the lower limit of the channel.

Remember the Linear Regression trading Strategy is a quick trade strategy and so you should remain exposed to the market for the shortest possible period of time, not exceeding 7 candlesticks.

Wrapping Up on How to Make Up to $300 a Day with the Linear Regression Trading Strategy.

So is it really possible to make up to $300 a day trading the strategy we have just discussed?

Yes, definitely.

With $10 in each position and 30 fruitful positions a day, you can see how easy that is.

With a huge lot size though, you can actually make more than $10 in one position. That makes it even easier to achieve the $300 daily target.

If you are new to this strategy, proceed to your trading account and apply the Linear Regression Trading Strategy either aggressively or conservatively, or both.

That way, you stand a chance to make a significant difference in that account.

Happy Trading!

Tagged With : linear regression trading strategy