Standard deviation

Standard deviation, which will be referred to as STDEV, is a basic measure of price volatility that is used in combination with a lot of other technical analysis indicators to improve them. We'll explore that in greater detail in this section.

Standard deviation is a standard measure that is computed by measuring the squared deviation of individual prices from the mean price, and then finding the average of all those squared deviation values. This value is known as variance, and the standard deviation is obtained by taking the square root of the variance. Larger STDEVs are a mark of more volatile markets or larger expected price moves, so trading strategies need to factor that increased volatility into risk estimates and other trading behavior.

To compute standard deviation, first we compute the variance:

Then, standard deviation is simply the square root of the variance:

: Simple moving average over n time periods.

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset
100.26.35.111