NORMALISATION INDICATOR
Rolling Z-Score
Expresses distance from a rolling mean in units of rolling standard deviation.
Start with the input, not the story.
Standardised deviation from a local average.
Plain-language formula
(Current value - rolling mean) / rolling standard deviation.
Platform implementations can differ in price input, smoothing, indexing and rounding. Record the exact settings and provider before comparing results.
03 / USEFUL REGIME
Where it may help
Comparing deviations across periods and systematic mean-reversion research.
04 / WEAK REGIME
Where it struggles
Trending, non-stationary series and fat-tailed distributions.
Add a different measurement.
Regime filterHalf-life researchRisk limits
A complementary tool should answer a different question, such as volatility, regime or position risk. Test the base rule before testing the combination.
The shortcut to avoid
Assuming a z-score of two implies a guaranteed or normally distributed reversal.
A testable next step
Test stationarity assumptions and report tail behaviour before setting thresholds.