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## NORMINV - Inverse of the Normal Cumulative Distribution

by QuantShare, 4445 days ago

NORMINV function is the inverse of the normal cumulative distribution for a specified standard deviation and mean. The normal probability density and the cumulative normal distribution can be calculated using the following function: NORMDIST - Normal Probability Density Function.

This function finds the z value given the probability that a value or variable is within a certain distance from the mean of the distribution.

The function gets three parameters:
Probability: A probability corresponding to the normal distribution. The value must be between 0 (0%) and 1 (100%).
Mean: The arithmetic mean of the distribution
Standard deviation: The standard deviation of the distribution. The value must be positive.

Example:

First, we assume that the one-bar rate of return of a security is normally distributed.

For each bar, we want to calculate the 90% confidence level. We will use the NORMINV statistical function to compute this.

p1 = perf(close, 1);
a = NORMINV(0.9, sma(p1, 500),stddev(p1, 500));

If our function returns 0.05 (5% because we are dealing with daily returns) on a specific bar, then there is 90% change that the one bar rate of return will stay below +5% level in the next bars.

To calculate the lower bound, you should use (10% or 100% - 90%) in the first argument of the NORMINV function.

What is this?

 Type: Trading Indicator Object ID: 1042 Country: All Market: All Style: Technical Analysis

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