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EABuilder Pro

Standard Deviation

Standard Deviation

Section titled “Standard Deviation”

Value of the market volatility measurement. This indicator describes the range of price fluctuations relative to simple moving average.

Interpreting the Indicator

Section titled “Interpreting the Indicator”

If the value of the indicator is high, the market is volatile with prices spread relative to the moving average. If the value is low, the market has low volatility with prices close to the moving average.

Use in Other Indicators

Section titled “Use in Other Indicators”

The standard deviation value is often used as a component in calculating Bollinger Bands®.

Standard Deviation rises when the price moves fast and falls back when the market calms down.

Calculation of Standard Deviation

Section titled “Calculation of Standard Deviation”
StdDev = SQRT(SUM((CLOSE - SMA(CLOSE, N))^2, N) / N)

Where:

  • SMA(CLOSE, N) is the simple moving average of the close price over N bars;
  • SQRT is the square root;
  • N is the indicator period.

Like ATR, the value is expressed in price units, not in pips.

Conclusion

Section titled “Conclusion”

The standard deviation indicator helps to understand the market’s volatility and its behavior. By analyzing its value, traders can make informed decisions.