R2 oscilator MT4

R2 (R-squared) represents the square of the correlation coefficient between current prices and deducted from the linear regression. It is the statistical measure of how well the regression line is adjusted to the actual data, and therefore it measures the strength of the prevailing trend without distinguishing between ascending and descending one.

The R2 value varies between 0 and 1, therefore it is an oscillator of bands that can show signs of saturation (overbought / oversold). The more the value approaches zero, the weaker the trend and, conversely, the closer you approach to 1, the stronger the trend.

For example, an R2 of 0.7 calculated over a period of 5 days means that 70% of the price movements in that interval are explained by the regression line and the remaining 30% is unexplained noise.

Parameters

• Symbol (empty = symbol current): working pair, for example, EURUSD.
• Period calculation: number of previous bars, to which the calculation is applied.
• Signal period: smooth signal period (EMA).
• Price applied: open, close...
• Timeframe: H1, H2, D1...
• Number of bars to apply (-1 = all): maximum number of bars to draw the indicator.

Calculation

R2(p,t)= [ Cov(p,t) / (stdDev(t) x stdDev(p)) ] Cov= covariance; stdDev= standard deviation
p= price; t= period

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