Introduction: The Z Score & Trend Following indicator is a tool used in financial markets to assess the standard deviation of a data point from its mean value over a specified period. It calculates the Z score, which is a measure of how many standard deviations an element is from the mean. This indicator also incorporates trend-following characteristics, allowing traders to visualize trends based on the Z score.
Indicator Parameters:
Standard Deviation Length: Determines the length of the standard deviation calculation. Average Length: Specifies the length of the moving average used for the mean calculation. Calculation Type: Allows users to choose between different types of moving averages (SMA, EMA, WMA, VMA, TMA). Standard Deviations: Sets the number of standard deviations to be used for trend analysis. Bar Color: Option to enable or disable bar coloring based on trend conditions.
Calculations:
Z Score Calculation: The Z score is calculated as the difference between the source data point and the moving average divided by the standard deviation. zscore = (src - (getMA(src, length))) / ta.stdev(src, slength)
Plots:
Z Score Plot: Plots the Z score values, typically in green. Inverted Z Score Plot: Plots the inverted Z score values (multiplied by -1), typically in red.
Lines:
Zero Line: A horizontal dotted line indicating zero. Upper Threshold Line: A dotted line representing the upper threshold defined by the number of standard deviations. Lower Threshold Line: A dotted line representing the lower threshold defined by the negative number of standard deviations.
Bar Color:
The bar color changes based on the Z score values and the predefined standard deviation thresholds. Green bars indicate values above the upper threshold, red bars indicate values below the lower threshold, lime bars indicate positive Z scores, and maroon bars indicate negative Z scores. Neutral values are represented by black bars.
Conclusion:
The Z Score & Trend Following indicator combines the statistical concept of Z score with trend-following characteristics to provide traders with insights into market trends and potential reversal points. By visualizing Z scores alongside trend analysis, traders can make more informed decisions regarding market entry and exit points.
Hey! great Indicator, keep up the good work. Yet somehow the bar color seems to be broken. Idk if its because of my adjusted inputs but they should be unrelated to that so i would highly appreciated if you can check for it. Thanks in advance and take care!!
Thanks in advance and take care!!