Standard Deviation

Standard Deviation (StdDev) is a technical instrument based on market volatility. The indicator describes price changes in regard to the moving average. When the index’s value is high, market is volatile and the bar prices are rather far from MA. When the values are low, the market has low liquidity and the price bars are close to MA.

Currently, traders use Standard Deviation toghether with other indicators. For example, when calculating Bollinger Bands, the StdDev value is added to its moving average.

It is quite easy to grasp this indicator as the market dynamic is a successive interchange of flat and volatile periods.

If the market is completely flat and the indicator has small values, a volatile period is expected.

If the market is active and the indicator reaches its highs, this volatility is going to fade soon.

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