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Miscellaneous > Price Distribution

Article/Author: Omega Research Inc.

Download: PRICE_DISTR.ELA

File Includes:

Indicator - ELD PriceDistrib

Category: Indicator > Miscellaneous

Description:

The Price Distribution Indicator uses the statistical concepts Kurtosis and Skewness to determine when the market is beginning to move directionally.

This Indicator uses two statistical concepts to determine when the market is beginning a significant move. The two concepts it uses are Skewness and Kurtosis. Skewness characterizes the degree of asymmetry of a distribution around its mean. Positive skewness indicates a distribution with an asymmetric tail extending toward higher, or more positive values, while negative skewness indicates a distribution with an asymmetric tail extending toward lower, or more negative values.

Kurtosis on the other hand, characterizes the relative peaked ness or flatness of a distribution compared with the normal distribution. Positive kurtosis indicates a relatively peaked distribution. Negative kurtosis indicates a relatively flat distribution.

Usage:

If the Kurtosis is positive, it probably means that the market is stagnant, and is moving sideways. When Kurtosis crosses under zero, it can be assumed that the market is starting to move, and then one can use the skewness of the distribution to determine the direction of the market.




Inputs:

KurtLen - Number of bars used to calculate Kurtosis
SkewLen - Number of bars used to calculate Skewness

EasyLanguage Code:

Input: KurtLen(40), SkewLen(15);

{ Calculating Indicator values }

Value1 = Kurtosis(Close,KurtLen);

Value2 = Skew(Close,SkewLen);

{ Drawing on the chart }

Plot1(value1,"Kurt");

Plot2(value2,"Skew");