UK Accounting Glossary
The Raff Regression Channel is started using ‘n’ points in a chart to construct a baseline channel. The n points are based on user input. NOTE: Some S/W applications require the user to identify a significant high and low in the price data. Other S/W applications require the user to input a time period.
The baseline channel consists of three lines, the centre line being a least-squares fit the price series over the n points of price data. The upper and lower channel lines are equally spaced and parallel to the centre trend line. The width of the channel is dependent on the high or low furthest from the centre line.
Once the baseline channel has been drawn then it is extended in time in order to predict areas of support/resistance and identify price breakouts. NOTE: Some S/W applications automatically start a new Raff Regression Channel once a breakout from the channel occurs while other S/W applications continue to extend the existing channel.
The Raff Channel is a set of channels which result when linear regression is applied to the closing price between a low in the price data and a high in the price data. Parallel lines to the regression line are drawn to indicate the position of significant highs and lows.
The Raff Regression Channel identifies support/resistance levels, indicates the current price trend and signifies a change in trend when the channel is broken. Short-term price movements beyond the channel may occur on occasion, but when the price stays outside for an extended period, a reversal of the existing trend is expected.
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This glossary post was last updated: 23rd March 2020.