Description

• It measures the closeness of actual price to price estimated by linear regression trend line
• Closer the prices to regression line, lower the StdError value and more reliable is trend
• High StdError value shows that price is volatile and trend is not consistent
• R-square (Coefficient of Determination) & StdError can be used in combination to confirm trend and reversal

Interpretation

• Sudden increase in StdError during running trend signals that trend is losing consistency, leading reversal signal
• Gradual upward moving R-square value and downward moving StdError value indicates a strengthening trend. It is generally during emergence of a new trend
• Sudden rise in StdError along with falling R-square value indicates rising price volatility and weakening trend, it is signal of reversal

For eg. A slope rises when it is above 20-day SMA and falls when it is below it

Default Parameters Used/Inputs

• Close Line
• Bars

Returns/Output

Standard Error values of stock for the specified period

Formula

StdError = SD / √n
where, SD = Standard Deviation