z-score-calkusi-v1.14

z-scores incorporate the moment of N look-back bars to allow future price projection.

z-score = (X - mean)/std.deviation ; X = close

z-scores update with each new close print and with each new bar. Each new bar augments the mean and std.deviation for the N bars considered. The old Nth bar falls away from consideration with each new historical bar.

The indicator allows two other options for X: RSI or Moving Average.
NOTE: While trading use the "price" option only.
The other two options are provided for visualisation of RSI and Moving Average as z-score curves.

Use z-scores to identify tops and bottoms in the future as well as intermediate intersections through which a z-score will pass through with each new close and each new bar.

Draw lines from peaks and troughs in the past through intermediate peaks and troughs to identify projected intersections in the future. The most likely intersections are those that are formed from a line that comes from a peak in the past and another line that comes from a trough in the past. Try getting at least two lines from historical peaks and two lines from historical troughs to pass through a future intersection.

Compute the target intersection price in the future by clicking on the z-score indicator header to see a drag-able horizontal line to drag over the intersection. The target price is the last value displayed in the indicator's status bar after the closing price.

When the indicator header is clicked, a white horizontal drag-able line will appear to allow dragging the line over an intersection that has been drawn on the indicator for a future z-score projection and the associated future closing price.

With each new bar that appears, it is necessary to repeat the procedure of clicking the z-score indicator header to be able to drag the drag-able horizontal line to see the new target price for the selected intersection. The projected price will be different from the current close price providing a price arbitrage in time.

New intermediate peaks and troughs that appear require new lines be drawn from the past through the new intermediate peak to find a new intersection in the future and a new projected price. Since z-score curves are sort of cyclical in nature, it is possible to see where one has to locate a future intersection by drawing lines from past peaks and troughs.

Do not get fixated on any one projected price as the market decides which projected price will be realised. All prospective targets should be manually updated with each new bar.

When the z-score plot moves outside a channel comprised of lines that are drawn from the past, be ready to adjust to new market conditions.

z-score plots that move above the zero line indicate price action that is either rising or ranging. Similarly, z-score plots that move below the zero line indicate price action that is either falling or ranging. Be ready to adjust to new market conditions when z-scores move back and forth across the zero line.

A bar with highest absolute z-score for a cycle screams "reversal approaching" and is followed by a bar with a lower absolute z-score where close price tops and bottoms are realised. This can occur either on the next bar or a few bars later.

The indicator also displays the required N for a Normal(0,1) distribution that can be set for finer granularity for the z-score curve.This works with the Confidence Interval (CI) z-score setting. The default z-score is 1.96 for 95% CI.

Common Confidence Interval z-scores to find N for Normal(0,1) with a Margin of Error (MOE) of 1:

70% 1.036
75% 1.150
80% 1.282
85% 1.440
90% 1.645
95% 1.960
98% 2.326
99% 2.576
99.5% 2.807
99.9% 3.291
99.99% 3.891
99.999% 4.417

9-Jun-2025
Added a feature to display price projection labels at z-score levels 3, 2, 1, 0, -1, -2, 3.
This provides a range for prices available at the current time to help decide whether it is worth entering a trade. If the range of prices from say z=|2| to z=|1| is too narrow, then a trade at the current time may not be worth the risk.

Added plot for z-score moving average.

28-Jun-2025
Added Settings option for # of Std.Deviation level Price Labels to display. The default is 3. Min is 2. Max is 6.

This feature allows likelihood assessment for Fibonacci price projections from higher time frames at lower time frames. A Fibonacci price projection that falls outside |3.x| Std.Deviations is not likely.

Added Settings option for Chart Bar Count and Target Label Offset to allow placement of price labels for the standard z-score levels to the right of the window so that these are still visible in the window.

Target Label Offset allows adjustment of placement of Target Price Label in cases when the Target Price Label is either obscured by the price labels for the standard z-score levels or is too far right to be visible in the window.

Practice makes perfect.

Use this indicator at your own risk