A Smoothed Multi-Horizon 3-Sigma Price Indicator

Summary

This indicator converts closing prices into rolling standardized deviations from their recent averages, then smooths the results across three lookback horizons. The supplied periods are 180, 60, and 20 observations. Each series subtracts its lookback average from the close and divides by the corresponding standard deviation. Repeated moving-average smoothing is then applied to all three standardized series, and the chart displays them against reference levels from −4 to 4.

The intended use is visual inspection of how price deviates from its own recent history at different horizons, in a control-chart style. The document argues that market prices are not normally distributed but does not present statistical tests or performance evidence. It provides indicator code and says a fuller description is available in a French PDF, which is not included here. The standardized readings therefore should not be treated as calibrated probabilities or standalone buy and sell signals; the note supplies no entry rules, risk controls, or backtest results.

Key ideas

• The indicator standardizes closing price deviations from rolling averages using rolling standard deviations.
• It calculates separate readings over 180, 60, and 20 observations.
• Each reading is smoothed through successive moving averages before charting.
• Reference levels from −4 to 4 help visualize the magnitude and direction of standardized deviations.
• The document gives no tested trading rules or evidence that the readings predict returns.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.