Moving Average Z-Score Suite

The Moving Average Z-Score Suite indicator transforms various moving average types into a normalized Z-Score oscillator to identify trend strength, overbought/oversold conditions, and potential reversals.

Usage

The Usage section describes how the script can be used to gauge market momentum and trend direction. The indicator provides a statistical perspective on price action by measuring how far a moving average deviates from its historical mean.

• Trend Identification: When the Z-Score crosses above zero, it suggests the price is above its mean, indicating a potential bullish trend. Conversely, a cross below zero suggests a bearish trend.
• Overbought/Oversold Conditions: Standard deviation levels (e.g., +2 and -2) act as markers for extreme price movements. Traders can use these levels to identify potential mean-reversion opportunities.
• Divergence Detection: The tool includes an optional feature to detect regular and hidden divergences between price and the Z-Score, signaling potential trend exhaustion or continuation.
• Candle Painting: Users can enable candle coloring to visually sync chart price action with the Z-Score trend state.

Details

The Z-Score is a statistical measurement representing a value's relationship to the mean of a group of values, expressed in standard deviations. This indicator applies this concept to moving averages, normalizing their values to make them comparable across different assets and timeframes.

The suite supports eleven distinct moving average types:

• Simple (SMA)
• Hull (HMA)
• Exponential (EMA)
• Weighted (WMA)
• Double Exponential (DEMA)
• Running (RMA)
• Linear Regression (LINREG)
• Triple Exponential (TEMA)
• Arnaud Legoux (ALMA)
• Kalman Hull (KHMA)
• T3 Moving Average

By converting these averages into a Z-Score, the script provides a quantifiable measure of trend persistence and volatility relative to the selected lookback period.

Settings

Calculation

• Moving Average Type: Selects the underlying moving average algorithm used for the Z-Score calculation.
• Calculation Source: Determines the price data (e.g., close, hl2) used for the moving average.
• Calculation Period: Sets the length of the selected moving average.
• Z-Score Lookback Period: Defines the window used to calculate the mean and standard deviation for normalization.

Extra Settings

• Sigma for ALMA: Adjusts the offset and smoothness specifically for the Arnaud Legoux Moving Average.
• Kalman Price Source: Specifies the source specifically for the Kalman filter logic.
• Measurement Noise: Controls the sensitivity of the Kalman filter to price changes.
• Process Noise: Adjusts the agility of the Kalman filter in following price trends.

UI Settings

• Show Standard Deviation Levels: Toggles the visibility of the 0, 1, 2, -1, and -2 horizontal levels.
• Show Extreme Levels: Displays filled regions for extreme Z-Score values (3 to 4 and -3 to -4).
• Paint Candles on Chart: Enables bar coloring based on the current Z-Score trend.

Divergences

• Show Detected Divergences: Toggles the calculation and plotting of divergence labels.
• Pivot Lookback Left/Right: Sets the number of bars required to confirm a pivot high or low for divergence detection.

FAQ

How do I interpret the Z-Score colors? The columns change color based on both the position relative to zero and the Rate of Change (RoC). A bright color indicates the Z-Score is moving away from zero (strengthening trend), while a faded color indicates it is returning toward zero (weakening momentum).

Which moving average should I choose? The choice depends on your strategy. SMAs provide stability, while HMAs or KALMAN-based averages offer reduced lag, making them more suitable for fast-moving markets.

How can I access the Moving Average Z-Score Suite? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.