Standardizing Price with a Rolling Z-Score and Standard-Deviation Levels

Summary

This indicator expresses closing price as a rolling z-score: the distance from its lookback simple moving average divided by the lookback standard deviation. It can plot the result as an area or transform open, high, low, and close into z-score candles. Shaded bands mark levels around zero and successive positive and negative standard deviations, while a table associates selected z-score levels with probability values. The script also converts those standardized levels back into price references using the rolling mean and standard deviation, and can display a moving average of the z-score and its deviation bands.

The tool frames price as unusually high or low relative to its recent distribution, which may support contextual analysis or mean-reversion hypotheses. It does not test those hypotheses or show trading results. The probability table assumes a distributional interpretation that may not fit market returns, and rolling estimates can shift as the lookback changes. The displayed levels therefore describe the chosen historical window; they do not guarantee future probabilities or reversals.

Key ideas

• The indicator standardizes closing price against its rolling mean and standard deviation.
• It can display standardized values as an area plot or z-score candles.
• Reference levels and a table relate z-score distances to probability values.
• Price labels translate z-score levels back into values using the rolling mean and deviation.
• The display offers statistical context but does not validate a trading strategy or guarantee reversals.

Tags

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