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The JMA Z Score is a trading indicator based on a moving average with a population of Z Score, which is used as a tool that determines the deviation of elements from the average value. For example, if the value of Z Score is less than zero, then the value of the element is less than the average, and if vice versa, Z Score is greater than zero, then the value is greater, if it is equal to zero, then the element is equal to the average value.
The JMA indicator serves not only as the basis for calculating Z Score, but also as the basis of the indicator itself, since taking into account its direction, color and zero crossing, the trend will be determined, and thus the direction of the position. The JMA Z Score indicator is an effective trading indicator, regardless from the selected timeframe and currency pair.
Input parameters
The JMA Z Score indicator can be called a small strategy based on JMA and Z Score calculations, this is due to the presence in the indicator settings of parameters related to both the first and second indicators. Their total number is 4. Also in the Colors section, it can be changed the color scheme of the indicator line, and in the Levels section, in addition to the zero level, others have been added.
- JMA smooth period - JMA smoothing period. The default value is 14.
- JMA phase - period of the moving JMA. The default value is 0.
- Z-score period - period of the Z Score indicator. The default value is 30.
- Price - the price to which the general indicator calculations will be applied. The default value is Close price.
Indicator signals
In the JMA Z Score indicator, a zero crossing of a moving level, a change in its direction or color can be evaluated as signals. Thus, taking into account these conditions, a position can be opened in a certain direction. Due to the presence of such simple signals, simple trading conditions are formed, which will allow using the indicator even novice traders. Under certain conditions, it is possible that the line may acquire a neutral hue, which does not belong to either a downtrend or an uptrend, in which case all initiated trades should be closed and new ones not temporarily opened, which means that a sideways trend has been determined on the market.
Signal for Buy trades:
- After the moving average crosses the zero level upwards, an uptrend is determined in the market.
- At the same time, it should be painted in a color with a height value.
After the formation of such conditions on a certain candle, a long position can be opened, which should be closed in several cases, for example, if the moving average changes its color or direction, crossing the zero level from top to bottom. This should be considered as a signal to open a new trade.
Signal for Sell trades:
- Moving JMA heading down, crosses its zero level, which indicates the beginning of a downtrend.
- The moving average should be colored with the falling value.
After such conditions have formed on a certain candle, a short position can be opened, which should be closed if the moving average changes its direction and crosses the zero level upwards or changes its color, such conditions provide an opportunity to open a new position.
Conclusion
JMA Z Score is a very logical and effective indicator, somewhat reminiscent of a mini strategy. Thanks to this combination of tools, an indicator was formed that allows conducting any trades with the maximum amount of profit. And in order not to make a mistake in the accuracy of the signal sometimes, it should be practiced on a demo account, this will allow gaining certain skills for using the JMA Z Score.
