The Raff Channel was developed Gilbert Raff and is calculated using the close prices in the lookback period. The symmetrical channel width is based on the high / low furthest removed from the linear regression line, as opposed to a standard deviation.
Indicator Description
A link to the NT8 Raff Channel indicator download is available toward the bottom of this page. If prices rise within the Raff Channel, the trend is up. Conversely, for scenarios where prices are decreasing, we have a down trend. During uptrends, when prices dip below the Linear Regression Line, you may us it to consider long setups. For example, one may consider bullish reversal setups that occur towards the lower channel line. Possible exit scenarios are found when prices approach the upper area of the Raff Channel indicator.
In an downtrend, you’ll look for short setups around the upper levels of the channel – and buy to cover at the lower end. For example, one may consider bearish reversal setups that occur towards the upper channel line. Possible exit scenarios are found when prices approach the lower area of the channel.
Raff Channel Repainting Behavior:
As with all other regression channels, the Raff Channel is a repainting indicator. Specifically, the channel is retrofitted to the selected lookback period. One may observe the repainting behavior by scrolling backwards on the chart.
As with the Library version of the Regression Channel, the Raff Channel comes with the option to plot regression bands. You will then see where the channel has plotted previously without repainting any prior bars. One may use these values (middle, upper, lower) for automated trading strategies. Finally, you may enter an offset and calculate the channel a few bars ago. The channel will then be extended until the last bar shown on the chart.
Public Raff Channel Dataseries:
The Raff Channel indicator comes with the following dataseries:
- SlopeSeries
- MaxDeviationSeries
- NormalizedSlope
- NormalizedChannelWidth
- RegressionTrend
The Intercept, Slope and Standard Deviation are needed to draw the Raff Channel. In particular, the SlopeSeries and MaxDeviationSeries are relevant for trading strategies.
SlopeSeries: indicates the current slope of the regression line (rise over run) and measuring the trend strength.
MaxDeviationSeries: indicates the high / low furthest removed from the linear regression line and is a measure of the quality of the trend (width of the channel)
NormalizedSlope: The slope does not provide meaningful values unless it is related to volatility. For example, on a daily chart the slope can frequently be 100 times the size of that in minute chart. Therefore, the Raff Channel indicator also comes with a normalized slope, determining comparable values for the trend strength across all chart types and time frames. You may apply that as filter for trading systems, i.e. only take positions if the trend is recognizable but not too advanced.
RegressionTrend: The DataSeries Regression Trend contains either the value + 1 (positive channel slope) or -1 (negative channel slope).
Market Analyzer Columns: The indicator comes with three separately coded market analyzer columns. They allow for displaying normalized slope, normalized channel width and the regression trend on the market analyzer.
Other Library indicators
Other Channel Indicators available from this category include the Donchian Channel, Projection Bands, Multiple Bollinger Bands, Keltner Channel, Daily Regression Channel and our improved version of the standard Regression Channel. The Linear Regression Channel specifically was discussed in this post.
The Raff Channel indicator is best used in combination with additional tools for technical analysis such as momentum oscillators, support / resistance and volume indicators. Specifically, you may review the Connors RSI, Laguerre RSI, MACD, SRSI, TSI or the Projection Oscillator. For support / resistance levels you may have a look our Session Tools or Fibonacci levels, such as Rolling Pivots Monthly weekly Fib retracement levels or the Fibonacci Bands. The Opening Range high / low and expansion levels may also serve as support / resistance.
Furthermore, you may consider average daily range levels for support / resistance. Our Indicator Spotlight discussed the Daily Range Projections and the Weekly Range Projections / Monthly Range Projections are also available from our Volatility Indicators category.
Finally, you may review our tools for Range and Volume Analysis, i.e. relative range / relative volume analysis, in order to validate trend continuation setups.
The Raff Channel indicator download is available for NinjaTrader 8.
