Practicing trader always needs to check the laws of the market movement, and to confirm the correctness of its decisions. Professional market participants are constantly searching and improving its own strategy, trying to improve the efficiency of capital management and make tactical moves more efficient. In all these cases the use of the Z-score will be close to the desired goal.
With this method, the amount of market analysis lot does not play a big role, the key factor will be the positive or negative value of the closed position. While using the Z-account trader collects data on positive and negative transactions and analyze them.
Alternation of losses and gains in Forex trading in each type of system is in its own way. For example, if the expected profit to be lower in relation to the amount of the expected loss amount of profitable trades is usually an order of magnitude greater than the loss-making positions filled.
The calculation of Z-account is as follows:
Z = (N * (R-05)-P) / ((P * (PN)) / (N-1)) ^ (1/2)
The main components of the formula are as follows:
N - the number of transactions a sequence;
R - the total number of winners and losers;
P = 2 * W * L;
W - the total number of winning trades in a series;
L - total number of losing trades in a series.
For the most accurate calculation of this indicator is recommended to use at least 30 values.
With a positive Z-score is most likely to be a continuation of the emergence of a losing position after profit, which indicates the propensity of the trading system to alternate. Frequency of going one by one, winning and losing positions in this case will depend on the size of the Z-score - the higher it is, the alternation frequency. In this situation, it is recommended to increase the size of the optimal lot after each losing trade and thus reduce it after each losing position.
With a negative Z-score is the most characteristic of the trading system is a series of consecutive winning and losing value. In this case you have to use several different tactics. After fixing loss advisable to immediately leave the market, and to enter into it only after the first profit. Thus, passing a losing position, the trader has passed a series of similar items, missing, in this case, only one of them profitable.