Standard Deviation Channel is built on base of
Linear Regression Trend representing a ussual
trendline built between two points on the
price chart using the method of least squares. As a result, this line
proves to be the exact median line of the changing price. It can be
considered as an equilibrium price line, and any deflection up or down
indicates the superactivity of buyers or sellers respectively.
Standard Deviation Channel consists of two parallel lines, equidistant up
and down from the Linear Regression Trend. The distance between frame of
the channel and regression line equals to the value of standard close
price deviation from the regression line. All price changes take place
within Standard Deviation Channel, where the lower frame works as
support line, and the upper one does as
resistance line. Prices usually exceed the
channel frames for a short time. If they keep outside of the channel
frames for a longer time than usually, it forecasts the possibility of
trend turn.
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