Linear regression swing alerts and trailing stops

Three jobs on one swing desk

The archive keeps a least-squares line through recent closes as a short-horizon forecast, converts sign changes on that line into long or short alerts, and requires the next bar to confirm before a position is taken. Editorially, those steps are separate jobs on one swing desk: the line forecasts, the reversal map only grants permission to watch, and a trailing stop later ends the trade so the same indicator is not allowed to both open and close it.

The endpoint is a forecast, not an average

A five-unit least-squares regression through recent closes can be used as a directional forecast. Its endpoint is meant to track short-term price shifts with less delay than a moving average of the same length. Relative to averages of that length, the five-unit endpoint is described as turning two bars earlier than a simple moving average and one bar earlier than an exponentially smoothed moving average. The moving endpoint is treated as a forecast rather than as an average of those same closes.

How the reversal map is updated

A reversal map built from the five-unit endpoint records plus one while the endpoint is advancing and minus one after it turns down. The map is updated by comparing the current endpoint with its stored prior value and emitting plus one when the current value is at least as high as that prior value.

An alert is not an entry

In the frequent-trading swing procedure, a move to plus one is only a long alert, with entry if the next bar breaks or closes above the alert-bar high. A move to minus one is only a short alert, with entry if the next bar trades or closes lower. The alert-bar is the bar on which the reversal map changes state. It marks permission to watch for a break, not an automatic entry.

Exit without waiting for a flip

That same procedure exits with a trailing stop instead of waiting for the reversal map to flip the other way. The trailing stop follows the open position and ends it without waiting for the reversal map to change sign.

A slower average as a trend filter

A trend-aligned variation uses a 13-unit simple moving average so that plus-one rallies below the average wait for a return to minus one before a short is considered, while minus-one pullbacks above the average wait for a return to plus one before a long is considered. Editorially, that slower average is a trend-aligned filter: a plus-one rally below it is treated as countertrend, and a minus-one pullback above it is treated as a dip in an advance.

The main short-term limitation

The reversal map is described as changing more often when price is range-bound or in a minor correction, which is presented as its main limitation for short-term swing work.