V11 – Z Score, Meaningful or Not?

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Viewing 8 posts - 1 through 8 (of 8 total)
  • 11/26/2020 at 3:51 PM #151776
    GraHal

    Hoping to get a discussion going on Z Score as it is a new feature available in V11.

    Attached is my Dashboard for an Algo I have been Forward Testing for over 6 months.

    You will see at the red arrowhead that it has a Z Score of 4.11.

    Is this just telling me that Gains and Losses show only small variations … compared to the other gains / losses of this Algo??

    If No … what is it telling me?

    If Yes (to above) then is a Z Score of 4  … meaningful in terms of predicting similar outcome for the future?

    11/26/2020 at 5:11 PM #151786
    Vonasi

    This seems like a reasonable description of Z score:

    https://www.forextraders.com/forex-education/forex-money-management/using-the-z-score-to-determine-trade-size/

    11/26/2020 at 5:31 PM #151790
    GraHal

    Ha thanks, we think alike … I distilled down to that same page last night and I now think I understand a little more what the instrument price Z Score means re suitability for trading.

    But I’ve still not got a hook to remember what Z Score of 1,2, 3 or 4 / 100% means for Algo results and what is might mean for future results?

    (PS  I would use the term dinner if I am having a more formal meal around 8 pm, but, for example, a mixed grill at 6pm ish then I refer to as tea 🙂 )

    11/26/2020 at 5:42 PM #151793
    GraHal

    Without the formula that PRT have used to determine Z Score the value displayed for each Algo is probably meaningless?

    Except that a higher score is better than a lower score … maybe?? 🙂

    11/26/2020 at 7:10 PM #151804
    GraHal

    From looking at my other Algos (with high and low Z Scores) specifically the Performance bars … a high Z Score shows on Algos with a streak of wins or losses … and the attached confidence levels can be attributed to the streak continuing the same.

    High confidence of the streak continuing means that increasing positions held (scaling in) might be appropriate?

    If in a Gain streak and a Loss occurs then the Gain streak might be over and a Loss Streak might be starting.

    It’s all if’s, might’s and maybe’s as nothing is 100% definite in trading.

    More detail is given in the link Vonasi provides above.

    11/26/2020 at 7:48 PM #151808
    Vonasi

    Meat can never be tea. Tea is made from plants. Just add hot water.

    Personally I don’t think that the z score has much use for deciding if a strategy is robust or efficient or not from what I have read so far. The first thing we have to do is find a strategy that is robust and efficient before we even consider whether we should be looking at how good the winning and losing streaks are so that we can then add money management to increase our gains and avoid our losses.

     

    1 user thanked author for this post.
    avatar GraHal
    11/27/2020 at 9:21 AM #151869
    Nicolas

    I can’t disclose the exact formula used, but I found a fairly good explanation on internet, here is a copy/paste:

    streak of losses/wins are random or not, the sign simply tells us if the dependence is positive or negative, meaning:

    Z-Score negative – dependence is positive.
    Z-Score positive – dependence is negative.

    Positive dependence – a profit will be followed by a profit and a loss by a loss.
    Negative dependence – a loss will be followed by a profit and a profit by a loss.

    And how certain can we be that it will happen? This is the percentage that is shown to you in your system’s z-score value. So for example, if z-score = 2.17(97.0%), it means there is a 97% confidence level that a loss will be followed by a profit and a profit by a loss (negative dependence). In such case you would want to miss a trade after a profit and take a trade after a loss to maximize profits and minimize losses.

    11/27/2020 at 10:03 AM #151880
    GraHal

    That’s good Nicolas, easy for us all to remember.

    I’m glad I added Z Score to my v11 Dashboard … Z Score is one more aid to help us make more £££’s.

    Cheers

    PS It would be well worth adding the link to your post as there may be more easily understandable nuggetts of information on that website?

    PS2  I found it, clever guy … can distill complex down to easy … 3rd Comment / Thought down.

    https://blog.myfxbook.com/2010/11/22/new-statistics/

     

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