The author of this indicator is Veronique Valcu. The z-score (z) for a data item x measures the distance (in standard deviations StdDev) and direction of the item from its mean (U): z = (x-StdDev) / U A value of zero indicates that the data item x is equal to the mean U, while positive or negative values show that the data item is above (x>U) or below (x Values of +2 and -2 show that the data item is two standard deviations above or below the chosen mean, respectively, and over 95.5% of all data items are contained within these two horizontal references (see Figure 1). We substitute x with the closing price C, the mean U with simple moving average (SMA) of n periods (n), and StdDev with the standard deviation of closing prices for n periods, the above formula becomes: Z_score = (C - SMA(n)) / StdDev(C,n) The z-score indicator is not new, but its use can be seen as a supplement to Bollinger bands. It offers a simple way to assess the position of the price vis-a-vis its resistance and support levels expressed by the Bollinger Bands. In addition, crossings of z-score averages may signal the start or the end of a tradable trend. Traders may take a step further and look for stronger signals by identifying common crossing points of z-score, its average, and average of average.
Can you clarify this: "identify common crossing points of z-score" ?
Any example scripts of this anywhere? :)
Captain_intrigue
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I’d like to hire you to modify this script for me. I have an idea for modifying this z-score indicator to trigger alerts based on a change of direction of z-score. For example; if z-score if below a certain threshold at -2 and dropping, if it changes direction upward after the next time interval then a green line is displayed and can be used for an alert. Would you be interested in this? I can provide more details.
goldenylion
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Sixth line: I guess the formula should be z=x-U/StdDev?
Ty for your attention
Alberto
cooney_s
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Thanks. Very useful indicator! Could you possibly Normalize the data into price bars in a lower panel?