Z-score
How many standard deviations today's close is from its 20-bar average.
What it shows
A z-score = (close − average) ÷ standard deviation. A z of +2 means the close is 2 standard deviations above its average. A z of 0 means it equals the average.
It is the same measurement used in the Bollinger bands, shown as a single number.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Compute the 20-bar SMA and standard deviation.
- z = (close − SMA) ÷ standard deviation.
- Plot under the price.
- Mark ±2.
Starting values: Length 20; Lines ±2. These are proposed and will be tuned on real price data before launch.
How to read it
- The panel shows the z-score.
- Dashed lines mark +2 and −2.
- Zero is the average.
Status labels you may see
| Label | What it means |
|---|---|
| Above +2 | z above 2. |
| Within ±2 | z between −2 and 2. |
| Below −2 | z below −2. |
What cancels it
Nothing cancels it.
What traders check next
- How long it stays beyond ±2.
- Trend.
- Bollinger bands.
Limits
- Prices are not bell-shaped.
- Beyond ±2 happens often in trends.
- Window is a choice.
Try it in forecastviz
- Open any ticker and choose Statistics and risk → Z-score in the left menu.
- Switch between 3M, 6M, 1Y to see how the picture changes.
- Compare with Bollinger %B and Bollinger bands on the same chart.
Questions
Same as Bollinger %B?
Related. %B is position in the band, z is in deviations.
How rare is +2?
Under a bell curve about 2.3%. Real prices stray more.
Related trends
Further reading
- Kaufman, Trading Systems and Methods
- Achelis, Technical Analysis from A to Z
- Mandelbrot, The (Mis)Behavior of Markets
- Sharpe, Mutual Fund Performance
Educational only. Not financial advice, and not a price forecast. Charts are drawn by code from past price data, which may be delayed.