The Z-Score Price Breakout Strategy uses the Standard Score indicator to determine whether the current price breakout is in an abnormal state, thereby generating trading signals. When the standard score of ** is higher or lower than a certain threshold, it means that ** has entered an abnormal state, and then you can go long or short.
First, the principle of strategy
The core metric of this strategy is the standard score (z-score), which is calculated as follows:
z_score:(close-ma(c,n))/std(c,n);
The standard score reflects the degree to which the current deviation from the average is achieved. When the standard score is greater than a positive threshold (for example, +2), it means that the current standard price is 2 standard deviations higher than the average price, which is a relatively high levelWhen it is less than a negative threshold (for example, -2), it means that the current ** is 2 standard deviations below the average price, which is a relatively low level.
The strategy first calculates the standard score of ** and then sets a positive and negative threshold (such as 0 and 0), which generates a ** signal when the standard score is above the positive threshold and a sell signal when it is below the negative threshold.
2. Advantage analysis
The use of standard scores to judge anomalies is a common and effective quantitative method.
It is easy to achieve long-term and short-term two-way trading.
Flexible parameter settings, adjustable periods, thresholds, etc.
It can be combined with other indicators to form a trading system.
List of high-quality authors 3. Risk analysis.
The standard score strategy is relatively extensive and prone to false signals.
Appropriate parameters such as periodicity and thresholds need to be set.
Stop-loss strategies should be considered to control risks.
Fourth, optimize the direction
Optimize the cycle parameters to find the best cycle.
Optimize the positive and negative thresholds to reduce false signals.
Add filters to combine with other metrics.
Add a stop-loss strategy.
5. Summary
The standard score breakout strategy determines whether the current is in an abnormal state and trades according to the positive or negative of the standard score. The strategy is simple and easy to trade in both directions, but it also carries some risks. Through parameter optimization and stop loss, the strategy can be strengthened and combined with other indicators to form a complete quantitative trading system.