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The NORMDIST function is similar to the one available in Excel. Given a set of parameters, this statistical function calculates the normal probability density function or the cumulative normal distribution function.
Here are the different parameters of the NORMDIST function: X: The function will return the probability of the value "x" occurring. Mean: The arithmetic mean of the current distribution Standard deviation: The standard deviation of the distribution Cumulative: Determines whether to return a cumulative normal distribution function (value set to 1) or a normal probability density function (value set to 0).
Example 1:
If we assume that the one-bar rate of return over past days is normally distributed then the next formula will return the probability of the current day one-bar rate of return occurring.
p1 = perf(close, 1);
a = NORMDIST(p1,sma(p1, 200),stddev(p1, 200),0);
If on bar N, the function returns 12 and on that bar the rate of return is -0.2%, then the probability of having a rate of return of -0.2% is 12%.
Example 2:
By specifying 1 in the "Cumulative" parameter, we instruct the function to return the cumulative normal distribution function.
