Home > Technical analysis > Indicators and oscillators > Standard Deviation


Standard Deviation

Standard Deviation measures volatility statistically. It shows the difference of the values from the average one. The volatility as well as the standard deviation gets higher if the closing prices and average closing prices differ considerably. If the difference is insignificant, the standard deviation and the volatility are low.

The reversals of trends such as bottoms or tops of the market are timed by high volatility levels. The new trends of prices growth after some recessive period are sometimes timed by low volatility levels.

The square root taken from the variance, which is the average from mean squared deviations, forms the Standard Deviation calculation. The considerable change of the data under analysis, such as indicator or prices, gives High Standard Deviation values. Stable prices form low Standard Deviation values accordingly.

The most considerable tops are thought to go along with the significant volatility that occurs due to processes of fear and euphoria of investors. Considerable lows do not give much profit expectations, which is why they generally pass calmer.



Related topics: