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Standard Deviation (SD)

Utility: Measuring Volatility

Standard Settings: 20 / 21 Periods

 

Introduction To Standard Deviation

Standard deviation is a very popular statistical tool that can be used for measuring volatility or else the shrink of values around an average. The Standard Deviation symbol is the Greek letter sigma (σ).

The standard deviation should not be used individually for the generation of trading signals, instead, it should be used for confirmation of other technical analysis tools and results.

 

Standard Deviation Meaning:

□ Larger the standard deviation larger the variability of values

□ Smaller the standard deviation smaller the variability of values

Standard Deviation

 

Standard Deviation Formula:

■ Standard Deviation can be calculated as follows:

(1) Firstly, we calculate the average (mean) value of the number of periods

(2) The mean is subtracted from all numbers, and the result is squared

(3) The squared deviations are summed

(4) The total sum is divided by the number of periods

(5) The standard deviation (σ) equals to the square root of the total sum

 

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What is Standard Deviation?

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