When looking at time series data, such as a stream of prices, it can often be useful to establish a general trend and represent this with a single number. This can be achieved using a linear regression calculation.
Take this series of prices:
4.8, 4.8, 4.5, 3.9, 4.4, 3.6, 3.6, 2.9, 3.5, 3.0, 2.5, 2.2, 2.6, 2.1, 2.2
If you plot on an Excel graph and add a linear trend line, you should get something like this:
We can do the same thing in code:
Now you have the slope of the trend line, this can be used as an input for neural networks analysing time series data. I use something similar in NNATS…
For a complete explanation of linear regression see Wikipedia.