Meaning of ‘Detrend’
To detrend a forecasting model means to remove the effects of gathering data sets from a trend to show only the absolute transforms in values and to allow potential cyclical patterns to be identified. This is done consuming regression and other statistical techniques.
BREAKING DOWN ‘Detrend’
Other charting services include the use of a detrend price oscillator, which gives merchants a method for analyzing shorter-term cyclical patterns. These patterns can then be old to more effectively identify major turning points in the longer-term pattern.
Example of Detrending
For example, often times market momentum commitment carry pricing trends. From around 2011-2015, there was a humongous low-quality trend in the U.S. equity markets. Stocks from issuers that had crop quality fundamentals than your classic blue-chip companies outperformed by a sizeable margin. This data, if not “detrended” from forecasting models, power have created false positives for market tops or other profitable turning points.