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Table of Contents
1 What Is the LRC?.............................................................................................2
2 Using the LRC Indicator…….....……………………………………………..................3
3 Inputs……………………………………….……………………………………………..……4

The risk of loss in trading can be substantial and may not be suitable for all investors
2. What is the LRC?

LRC stands for Linear Regression Channel. The TTM LRC is designed as a trend-identifying reversion to
the mean indicator. Based on the short-term trend of the market, lines are created at 1 and 2 standard
deviations outside of the current price based on a 35-period average.

The middle line (yellow in the picture below) is the linear regression line that best fits all the data points
of interest for the period. The upper and lower channel lines (red and purple in the picture below) run
parallel to the linear regression line by one and two standard deviations. The inner channel represents
one standard deviation and contains 68.2% of price data. The outer channel is two standard deviations
away and comprises 95% of all prices for the designated period.

The LRC is a dynamic indicator. It is not static. As price action changes, the linear regression lines will
automatically adjust and the channel will become up trending, down trending, or sideways depending on
current market conditions.
3. Using the LRC Indicator

As mentioned on the previous page, the LRC indicator is based on a regression to the mean strategy.
The idea is that price will naturally pull back to its mean periodically, whether trending or in a state of
consolidation. The yellow linear regression line plots this mean and we attempt to exploit prices that
travel too far from it.

This indicator does not plot “signals” in the traditional sense. Instead we interpret price action below the
lower regression channel as a buy zone and prices above the upper channel as a selling opportunity. The
goal is to fade these extremes and look for the market to return to the linear regression line, i.e. the
mean, and potentially to the other side of the channel.

In the example above, there is a short-term downtrend in place. Therefore traders would treat prices
above the upper red channel lines as sell areas and look for a return to the mean and potentially a test of
the lower side of the channel. If given a margin on the chart, the LRC lines will also extend past current
price action, making it easier to pre-position targets.

This indicator can be applied to any market on any time frame. It can be a valuable tool for swing trading
as well as intraday.

The risk of loss in trading can be substantial and may not be suitable for all investors.
4. Inputs

General tab – Displays the name and version of the indicator; use default settings.
Alerts tab – Used to set up custom alerts based on the indicator.
Style tab – N/A
Color tab – Sets the color of each of the LRC lines.
Scaling tab – N/A
Advanced tab – Allows for tick optimization; use default auto setting.
Inputs tab – Contains all adjustments for the indicator parameters:
o Length: number of bars used to calculate the indicator values
o Begin/End Date/Time: Leave set to “0”
o NumDevsUp1: Sets the number of standard deviations for the 1st upper channel line.
o NumDevsDn1: Sets the number of standard deviations for the 1st lower channel line.
o NumDevsUp2: Sets the number of standard deviations for the 2 nd upper channel line.
o NumDevsDn2: Sets the number of standard deviations for the 2 nd lower channel line.
o LRColor: Sets the color for the linear regression line.
o UBColor: Sets the color for the upper standard deviation channel lines.
o LBColor: Sets the color for the lower standard deviation channel lines.
o ExtRight: If set to true, extends LRC lines past price action to the right.
o ExtLeft: If set to true, extends LRC lines to the left beyond initial price action.

The risk of loss in trading can be substantial and may not be suitable for all investors