Online Trading Concepts

Time Series Forecast

The Time Series Forecast uses Linear Regression to calculate a best fit line over a designated time period; this line is then plotted forward a user-defined time period.

The chart below of the mini-Dow Futures contract shows the Time Series Forecast indicator:

Time Series Forecast

The chart above illustrates how the Time Series Forecast line has been plotted forward (in the example above, 7 days).

Generally, traders expect price to return back to the Time Series Forecast line when prices have strayed. Therefore, a vague buy signal could occur when price is below the line and a sell signal could occur when price is far above the line. However, how far price needs to vary from the line is very subjective.

A similar and arguably superior technical indicator, is the Linear Regression Curve (see: Linear Regression Curve).

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