VQZL Z-Score from Smoothed Price Action and Volatility

Summary

This indicator builds a volatility and direction measure from smoothed open, high, low, and close prices. The user can select among many moving-average methods and adjust price smoothing. From those smoothed prices, the script calculates a normalized price-action quantity using the change from the prior close, the bar range, and true range. It then standardizes that series against its rolling mean and standard deviation to produce a Z-score.

The plotted score changes color across positive and negative threshold bands, with increasingly strong colors at more extreme readings. The code labels the bands using probability-style percentages, but it supplies no derivation showing that the score follows a normal distribution or that those labels represent calibrated probabilities. It is an indicator rather than a complete trading strategy: the direction-change conditions are calculated, but their chart annotations are commented out, and no entries, exits, or performance results are provided. Users would need to test the signal and its parameters on their own instruments and timeframes.

Key ideas

• The indicator computes a price-action measure from smoothed OHLC values and normalizes it over a rolling window.
• A broad menu of moving-average methods allows users to change how prices are smoothed.
• Color bands distinguish positive and negative Z-score magnitudes around zero.
• Threshold labels imply probability levels, but the document does not validate that statistical interpretation.
• The script does not define a complete trade-entry and exit system or report backtest evidence.

Tags

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