Z-Score Indicator Explained

The Z-Score answers 'how unusual is this price?' with statistical precision: (price − rolling mean) ÷ rolling standard deviation. A Z of +2 means price sits two standard deviations above its recent average — the same statement on any symbol, any timeframe.

How It Works

• (Close − SMA(N)) ÷ StdDev(N) per bar.
• ±2 covers ~95% of normal variation; beyond it is statistically stretched.
• Self-normalizing: thresholds transfer across markets without tuning.

How to Trade It

The cleanest mean-reversion frame: enter as Z re-crosses back inside from beyond ±2, target Z ≈ 0, stop if it extends past ±3 (stretched can get stretcheder — that's the trend telling you to stand down). Also ideal for pairs logic on spreads built in the Indicators Lab.

Building It in Setup.Cash

Add Z-Score in the strategy builder — the length input controls its sensitivity — and use its value in any entry, exit, or filter condition. You can also combine it with other tools in the Indicators Lab or via the AI indicator generator. Compare with Bias (percent version) and PGO (ATR version). For the full category overview, see the volatility & statistics library guide.

Volatility indicators qualify trades rather than generate them — backtest your system with and without this filter and compare the drawdowns.