Standard deviation (SD)indicator measures the price deviations from the moving average (volatility).
This indicator is often used as a compound part of the other more sophisticated indicators (e.g. Bollinger Bands).
How to interpret
Trader needs to know that periods of market activity and calm usually alternate each other.
- High 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 (consolidation).
- Low SD line means low volatility (prices are stable). Extreme SD lows may signal the forthcoming market move.
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