Linear regression trading approaches the trading of stock market securities from
a mathematical methodology known as statistics instead of the more traditional methods.
Traditional methods derives its buy and sell signals from the traditional discipline
of technical analysis, whereas, Linear regression trading derives its buy and sell
signals from the mathematical discipline of statistics.
Linear regression trading is derived from a branch of mathematics called statistics.
Statistics is the science of the collection, organization, and interpretation of
data. In statistics, linear regression is an approach to modeling the relationship
between a linear variable and a non-linear variable to make a predication or forecast
of the non-linear variable in the future. When applied to trading, linear regression
develops a model between the linear variable of time and the non-linear variable
of price to make a predication of the future price of the market or security. Linear
regression is a pure mathematical approach to forecasting the future price of a market
or security and is therefore an objective method of predication whereas traditional
technical analysis is more of a subjective method of identifying price patterns to
predict the future price of a security or market.
So which is the better method? In my opinion the statistical method is more of a
scientific methodology whereas the traditional methods are more of an art form. Therefore,
I would have to lean towards the statistical method as being the better method of
trading the stock market and this is why I am developing this website.