Standard deviation

Standard deviation

Standard deviation (SD) indicator measures deviations of the price from the moving average (volatility). This indicator is often used as a part of the other more sophisticated indicators (e.g. Bollinger Bands).

How to interpret

The rise of SD line means high volatility and vice versa. Traders need to know that periods of market activity and calm usually alternate each other.

- The rise of SD line means high volatility because closing price and average closing price significantly differ. Extreme SD highs warn that the current activity will soon calm down and will be followed by a period of consolidation.

- The decline of SD line means low volatility (prices are stable). Extreme SD lows may signal the forthcoming market move.

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