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In statistics, kurtosis measures the relative peakedness of a probability distribution compared with the normal distribution. This is why we also call it "excess kurtosis".
The higher the kurtosis value is, the sharper the distribution peak and the longer & fatter the tails are.
The lower the kurtosis value is, the rounder the distribution peak and the shorter & thinner the tails are.
- Mesokurtic or mesokurtotic refers to distributions with zero excess kurtosis. The normal distribution is an example of a mesokurtic distribution.
- Leptokurtic or leptokurtotic refers to distributions with positive excess kurtosis. Example: Student's t-distribution, Laplace distribution, Cauchy distribution, Exponential distribution, Rayleigh distribution and Poisson distribution.
- Platykurtic or platykurtotic refers to distributions with negative excess kurtosis. Examples: Raised cosine distribution, Bernoulli distribution and Uniform distributions,
The kurtosis indicator returns the excess kurtosis of the probability distribution of a time-series over the past N-bars.
Examples:
a = Kurtosis(close, 200);
plot(a, "");
The above formula plots, on a chart, the excess kurtosis of the close series for each bar and for the previous 200 trading days.
rule1 = Kurtosis(close, 200) == 0;
The above rule returns 1 on the bar where the probability distribution of the past 200 close prices is normal (Prices are normally distributed).
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
