Letters To S&C by Technical Analysis, Inc.
LEAST SQUARE, MOST COOL
"A regression-based oscillator" by Patrick E. Lafferty (STOCKS & COMMODITIES, September) was very
good, and I would like to see many more articles by him. His trading method was logically developed and
appears to be very promising.
As the basis of his approach depends upon a least-square trend, I was dumbfounded in applying this
method because I did not understand the least-square equation:
P = 390.52 - t(0.77202) + t2 (0.0055339)
where P is the price of June gold in dollars per ounce and t is the time in days. I do not understand where
these values in the equation come from, let alone what t (time from where?) exactly means.
I would appreciate it if you would explain this least-square equation in a little more detail. And please
understand that I am not a mathematician.