The «Regression» 5-minute Trading Strategy
In addition to the standard indicators widely used on exchanges and Forex, there are also lots of other custom developments. Internet development has advanced trading for the masses, which has made it possible for enthusiasts to implement their ideas and share their products with the global community of traders. The most popular international portal among traders is the TradingView service (site: https://www.tradingview.com). It is both a forum for exchange players and a platform for market analysis, as well as many additional services.
The most popular is the live chart on TradingView. The level of functionality is quite professional: thousands of technical analysis tools are available, most of which are created by trader enthusiasts. In this article, we will review the «Regression» strategy, based on 2 user tools for trading binary options that are very popular in the community.
Overview of the indicators
Elastic Volume Weighted Moving Average & Envelope is a solution from one of the community leaders, a user with the nickname «LazyBear». This indicator looks rather simple, as it consists of only one line. However, it is an effective solution for technical analysis, especially when combined with additional signal filters. It is a Moving Average, but it is fundamentally different from ordinary solutions of this type. The main input parameter is the volume of trading, not quotes from the chart.
The formula assesses two parameters. First, the standard figure of the arithmetic mean value of the price for a certain period of time established in the settings. Second, the trading volume is taken into account. A curve with the calculation result is superimposed directly on the chart. It most accurately reflects the situation on the market, which is why EVWMA_LB is so popular among traders. This development is in the TOP 100 of the most well-known custom indicators on TradingView, like many other solutions from the developer known as LazyBear.
Linear Regression Slope – Version 2 – this tool’s appearance is very similar to MACD, and it also consists of a histogram and a Moving Average. This is a modified version of the main tool for trading on linear regression strategies. The essence of this technique lies in the construction of a regressive price channel consisting of 2 parallel lines and one median curve. In this combination, they play the role of price support and resistance. In the updated version of this indicator, the height of the histogram bars is determined by the coefficient of the actual price deviation from the channel boundaries. The second version of UCS-LRS has greater clarity and a simplified interface in the form of a classic histogram.
Preparation for trading
An advantage of TradingView strategies is that they are universal. You can trade on their signals on any platform that supports the required assets and chart settings. For beginners, the best choice is Binomo (site) – this is one of the leaders in our binary options brokers rating. The company’s terminal supports 50 trading assets, as well as 1-minute charts and 5-minute Up/Down trades. The trading platform and the live chart for technical analysis can be opened in adjacent browser tabs, or placed side by side in separate windows.
- Open the Binomo trading platform and the TradingView live chart in different tabs, select a currency pair (for example, EUR/USD) and activate the 1-minute time frame for candle charts.
- In the TradingView window, we add two indicators: Elastic Volume Weighted Moving Average & Envelope and Linear Regression Slope – Version 2. The standard settings are not changed.
- We determine in advance the amount of investment in trades by setting this value on the trading terminal. It is recommended to use no more than 5% of the current account balance.
If the trading platform supports it, we also set a 5-minute expiration for the trades. However, on Binomo, the duration of contracts is adjusted right before entering the market, and the default is the minimum 1-minute interval.
Trading signals on the strategy
The Regression strategy uses unique indicators. They are very efficient, but at the same time they have a very simple interface. This should not create any illusions for the trader. You can be convinced of the high efficiency of the strategy by analyzing the signals on historical data of the live chart on your own.
The signal for an increase is a blue bar forming on the histogram following a red one. The rising candle overtakes the EVWMA_LB curve, as a result of which the latter moves to a position below the price on the chart.
The signal for a decrease is the formation in the UCS-LRS window of a blue histogram bar after a green one. On the chart, a descending candle breaks through the EVWMA_LB curve.
The market is entered after both indicators confirm the signal. There is often a certain discrepancy in time, but it should not exceed 2 minutes. An exception is a situation when after the breakdown of the curve on the chart, the price builds in close proximity to it. Then the signal from the histogram confirms that a trend reversal has taken place, accordingly, the moment of entry into the market has not yet been lost. A similar situation is clearly illustrated in the picture above, where examples of signals for an increase are indicated.