The following functions can be used for normalizing and compressing indicator values to a range that's independent of the asset and time frame. Normalization to a fixed range, such as -100..+100 or 0..1, is often required for machine learning algorithms.
center (var Value, int TimePeriod): var
Centers Value by subtracting its median over the TimePeriod. Using the median instead of the mean reduces the effect of outliers.
compress (var Value, int TimePeriod): var
Compresses Value to the -100...+100 range. For this, Value is divided by its interquartile range - the difference of the 75th and 25th percentile - taken over TimePeriod, and then compressed by a cdf function. Works best when Value is an oscillator that crosses the zero line. Formula: 200 * cdf(0.25*Value/(P75-P25)) - 100.
scale (var Value, int TimePeriod): var
Centers and compresses Value to the -100...+100 scale. The deviation of Value from its median is divided by its interquartile range and then compressed by a cdf function. Formula: 200 * cdf(0.5*(Value-Median)/(P75-P25)) - 100.
normalize (var Value, int TimePeriod): var
Normalizes Value to the -100...+100 range through subtracting its minimum and dividing by its range over TimePeriod. Formula: 200 * (Value-Min)/(Max-Min) - 100 .
zscore (var Value, int TimePeriod): var
Calculates the Z-score of the Value. The Z-score is the deviation from the mean over the TimePeriod, divided by the standard deviation. Formula: (Value-Mean)/StdDev.
Value - Variable, expression, or indicator to be normalized.
TimePeriod - Normalization period.
- All above functions generate series and thus must be called in a fixed order in the script.
- There are other functions for compressing a data series in various ways. F.i. tanh compresses to the -1..1 range, sigmoid ( 1./(1.+exp(-x)) ) compresses to the 0..1 range, Normalize and AGC compress to -1..+1, PercentRank compresses to 0..100, and FisherN compresses so that most values fall inside -1.5..+1.5.
PlotWidth = 600;
PlotHeight1 = PlotHeight2;
PlotBars = 400;
LookBack = 200;
var ATR100 = ATR(100);
AGC, FisherN, advise, cdf
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