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Ronald McEwan wrote:
>
> On Sun, 09 Nov 1997 16:04:17 GMT brianr10@xxxxxxxxxxxxxxxx (Brian Rogers)
> writes:
> >What does this indicator do? Iplotted it and it looks very squiggly.
> >Used Y=14.
>
> the z score measures standard deviation around a mean (moving average). A
> simple application is to use the cross over of the zero line as a signal
> to go long or short.
>
> Happy Trading :-)
> Ron McEwan
Just another note about this thing Brian. What is key is that the log
of the differance in the closing prices as Ron has diagramed, when these
log of first differance are put into a frequency distribution, this
distribution "approaches" a NORMAL DISTRIBUTION curve. What this means
is that you can use the equations that describe the curve to help form
an opinion about where price is.
Most if you recall about 68% of all events in a normal distribution are
one standard deviation around the mean. I think its about 94% of all
events in a normal distribution are within two deviations around the
mean.... From a little study a long time ago of first price differences
not converted to log differences.. is that out on the end of the tail of
the frequency distribution curve the tail curves up.... This is the big
thing about price behavior.... lurking out there in the land of 5 to 6
deviations from the mean.. is something really ugly if you are on the
wrong side... so you have to be careful about stuffing price into
normal distribution..
Don
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