THEORY: Standard Deviation:
Standard deviation is a measure of market volatility. This indicator characterizes the size of price fluctuations relative to a simple moving average.
So, if the indicator value is large, the market is volatile, and the bar prices are quite scattered relative to the moving average.
If the indicator value is small, the market is characterized by low volatility, and the bar prices are close enough to the moving average.
Usually this indicator is used as an integral part of other indicators.
So, when calculating the Bollinger Bands®, the standard deviation of the instrument is added to its moving average.
The market dynamics consists in a sequential alternation of periods of rest and bursts of activity, so the approach to this indicator is simple:
if the indicator value is too small, that is, the market is completely at rest, then it makes sense to expect an imminent surge in activity;
on the contrary, if the indicator is extremely large, it means that this activity is likely to decline soon.
StdDev = SQRT (SUM ((CLOSE - SMA (CLOSE, N)) ^ 2, N) / N)
SQRT - square root;
SUM (..., N) - sum over N periods;
SMA (..., N) - simple moving average with period N;
N - calculation period
- StdDev TF Average TT.mq4
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