Standard Error Channel
Parallel lines drawn higher and lower from the Linear Regression Trend line form Standard Error Channels. The distance at which they are traced is a certain number of standard errors over or above the linear regression trend line.
The characteristic of the price fluctuations is its movement from one extreme to another and it depends on the traders' common opinion. Prices trend up in the optimistic market whether a pessimistic one causes prices reduction.
TThe prices are drawn to a certain equilibrium point existing for each issue. The location of such point can be found out by using the Linear Regression analysis whether Standard Error Channel analysis presents the data about the cyclic direction of the prices as well as the forecasts for possible trend changes.