Description

A standardized score(Z-Score) is a measure of the relative spread of an observed or measured value that shows how many standard deviations make up its spread of the relative mean.

How the Z-Score is calculated

The Z-Score indicator measures how much the current price value deviates from its moving average in terms of standard deviations.

Calculating the moving average of the closing price over $ n $ periods:

$$ MA_t = \frac{ \sum_{i=0}^{n-1} C_{t-i} }{n} $$

Where:

$MA_t$ is the moving average of the closing price,
$C_t$ - closing price,
$n$ - number of periods.

Calculation of the standard deviation of the closing price for $ n $ periods:

$$ \sigma_t = \sqrt{ \frac{1}{n} \sum_{i=0}^{n-1} (C_{t-i} - MA_t)^2 } $$

Where:

$\sigma_t$ is the standard deviation of the closing price over $n$ periods.

Z-Score calculation:

$$ Z_t = \frac{C_t - MA_t}{\sigma_t} $$

Where: