Linear Regression Channel
A linear regression channel draws the best-fit straight line through a price series, with parallel lines above and below it. The Raff version sets the channel width by the high or low furthest from the regression line; breaks outside the channel can signal a trend change.
Hand-drawn trend lines depend on which points you pick. A regression channel removes that choice: it fits a straight line mathematically through the whole price series, then wraps a channel around it. Traders use it to measure trend direction and spot when price strays too far. This entry explains how the channel is built and how to read it.
- Category
- Indicators and Tools
- Reading time
- 4 min
- Also called
- Raff Regression Channel, Regression channel, Linear regression line
- Updated
Regression channels in plain words
The Raff Regression Channel, developed by Gilbert Raff, is a linear regression with evenly spaced lines above and below; its width is set by the high or low furthest from the regression line.1
Linear regression is the least-squares line of best fit through a price series.1
Other channels set their width with volatility instead — Bollinger Bands, for example, sit two standard deviations from a moving average.2
How to use a regression channel, step by step
Choose start and end points
Usually a significant low and high. See Swing High and Swing Low.
Fit the regression line
The platform calculates the best fit.
Set the width
Furthest high or low (Raff) or a standard deviation multiple.
Read the slope
Up, down or flat shows trend direction. See Trend.
Watch the edges
Touches can mark overextension.
Watch for breaks
A move outside the extended channel can end the trend.
Worked examples
Example 1 — Channel width
$94–$106The regression line at the end date is $100. The furthest low sits $6 below the line; the furthest high $4 above.
| Width from line (Raff) | $6 (the larger distance) |
| Upper channel | $106 |
| Lower channel | $94 |
The channel width comes from the high or low furthest from the regression line.1
Example 2 — Trend intact
UptrendPrice keeps rising inside an upward-sloping channel for three months.
| Slope | Up |
| Price inside channel | Yes |
As long as prices keep rising within an upward-sloping channel, the trend is considered up and there is no reason to exit.1
Example 3 — Break below
Trend breakPrice closes below the lower channel extension at $92.
| Close vs lower line | Below |
| Reading | Uptrend may be reversing |
An uptrend is considered reversed when price breaks below the extension of the lower channel line.1
Regression channel vs hand-drawn channel
| Aspect | Regression channel | Hand-drawn channel |
|---|---|---|
| Middle line | Best fit through all prices | Chosen by the trader |
| Objectivity | High | Lower |
| Depends on | Start and end dates | Chosen touch points |
| See also | Standard deviation channels | Channel |
How traders use regression channels
Trend measurement
Slope shows direction and strength.
Mean reversion
Fading moves to the channel edges. See Mean Reversion.
Breakout signals
Exits when price leaves the channel. See Breakout.
Targets
The opposite channel line as a target.
Advantages and disadvantages
Advantages
- Objective trend line.
- Clear channel boundaries.
- Works on any market and time frame.
Disadvantages
- Changes with start and end points.
- Redraws as new data arrives.
- A straight line can't fit curved trends.
Going deeper
Read as far as you need. Each level builds on the one before it.
Least squares
Beginner
The regression line minimises the sum of squared distances between prices and the line — the classic line of best fit.1
Different width methods
Intermediate
Some platforms use standard deviations from the regression line instead of the furthest point; standard deviation measures how widely prices spread around an average.3 See Standard Deviation.
Redrawing risk
Advanced
Because the line is recalculated with each new bar, past channels look cleaner in hindsight than in real time. See Look-Ahead Bias.
Common mistakes
Random anchor points
Start at meaningful swings.
Fitting curved trends
A straight line will misfit.
Ignoring redraws
Live channels move.
Fading strong breakouts
Edges don't always hold.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A regression channel fits a best-fit line through prices.
- Parallel lines form the channel around it.
- Raff channels use the furthest high or low for width.
- Price inside the channel means the trend continues.
- The channel changes with its anchor points.
Frequently asked questions
What is the Raff Regression Channel?
Does a regression channel repaint?
Which time frame works best?
Further learning
- Channel
Hand-drawn channels.
- Standard Deviation
An alternative width method.
- Bollinger Bands
Volatility-based bands.
- Mean Reversion
Trading the edges.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- StockCharts ChartSchool. Raff Regression Channel (opens in a new tab) Checked .
- StockCharts ChartSchool. Bollinger Bands (opens in a new tab) Checked .
- StockCharts ChartSchool. Standard Deviation (Volatility) (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.