Raff Regression Channel

Raff regression channel, also known as regression channel, Raff regression and linear regression channel is a handy indicator for finding support and resistance levels for trends. The indicator was developed by Gilbert Raff. Raff regression channel is an application of linear regression trendlines, which uses the least squares fit method to plot trends.

Raff regression channels are plotted directly over price charts as equidistant parallel lines to linear regression trendline. The distance between the channel lines and regression line is the greatest distance to a high or low price from the trendline. The upper line is considered as the resistance and the lower line is considered as the support. Most trading systems available today can easily draw Raff regression channels with only one parameter, the time period. A new channel is created when the price break the existing channel.

Raff regression channel is a simple tool for finding support and resistance. Prices regularly swing between the upper and lower lines. Buy signals can be generated when price cross center regression trendline from below and sell signals can be generated with price cross the line from above. Short-term price movements beyond the channel may occur many times, but when the price stays outside for extended period, reversal of existing trend is expected.

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