This is the TimeToTrade help wiki. Use the TimeToTrade Trigger Trading Technology™ to execute your trades when Price, Candle Stick, Trend Line, Volume and Technical Analysis chart conditions are met - no coding required. Trade directly in the world’s global markets. Backtest your Trading Strategies. Calculate your UK HMRC Capital Gains Tax liabilities. Manage your Investment Club.

# Standard Deviation

Standard Deviation is a statistical measure of volatility. It measures the difference between the market’s closing price and its average price over a defined preceding period of time. The more the price ‘deviates’ from its average i.e. the larger the difference between the closing and average prices, the more volatile the price is said to be and the higher the Standard Deviation. The Bollinger Bands® indicator is based on Standard Deviation.

In times of high price volatility the Standard Deviation increases and in times of low volatility the Standard Deviation decreases.

The Standard Deviation is based on the range of price movement relative to the Moving Average. The number of periods associated with the Standard Deviation, are used to calculate the moving average, and the number of deviations is used to calculate the Standard Deviation around the moving average.

The prices at each interval for the defined number of periods are used to determine the deviation values. One standard deviation represents 68.2% of the range of price movement relative to the moving average; two standard deviations represent 95.4% of the price movement relative to the moving average and therefore only excludes the extreme highs and lows during the period; three standard deviations represents 99.6% of the price movement.

## Standard Deviation Formula

The expectation is that the price distribution around the Simple Moving Average forms a bell curve and that Standard Deviations can be used to establish if the price movement is within normal trading ranges. The following chart provides a visual representation of a classic bell curve with the Standard Deviations representing the range of price movement captured within each deviation:

where:

• 1 Standard Deviation (1σ) = 68.2%
• 2 Standard Deviation (2σ) = 95.4%
• 3 Standard Deviation (3σ) = 99.6%

The Standard Deviation chart is calculated based on 1 Standard Deviation. Multiply the Standard Deviation by 2 or 3 to calculate it at vary deviations.

To calculate the Standard Deviation start by calculating the Simple Moving Average, where $\displaystyle n$ is typically 10 or 20 periods:

$\displaystyle \text{Simple Moving Average} = \displaystyle \frac { \displaystyle \sum_{j=1}^n \text{CLOSE}j } { n }$

To calculate the Standard Deviation:

$\displaystyle \text{Standard Deviation} = \displaystyle \sqrt { \frac { \displaystyle \sum_{j=1}^n (\text{CLOSE}j - \text{Simple Moving Average})^2 } { n } }$

## Standard Deviation Indicator

The Standard Deviation indicator can be displayed on the TimeToTrade charts. To add the Standard Deviation indicator to the TimeToTrade charts, go to the chart settings and click on the 'Add Indicator' button. Click on the search box and type the name of the indicator that you are looking for, or for example type Standard Deviation and scroll through the results:

After adding the Standard Deviation indicator, within the chart settings, click on it to set the parameters and change colours.

It has never been easier to execute your trading strategy. Our Trigger Trading Technology ® means you can now automatically execute your trades directly in the world’s global markets.

You need never miss a trading opportunity again!

Do you want to:

• or sell when a support trend line is broken?
• or back-test your strategy going back as far as 30 years?

Open a FREE TimeToTrade account today to:

• Trade UK, US and European Shares - apply now
• Execute trades when your Price, Candlestick, Trend Line, Volume and Technical Analysis chart conditions are met using the Trigger Trading Technology® - learn more - help video
• Real time Forex, UK, European and US stock market data - learn more
• All the tools you need to set up and run a successful investment club - learn more
• Manage your Portfolio and calculate UK HMRC Capital Gains liabilities and SA 108 CGT Tax Returns - learn more
• Apply for a trading account today to get the Live Account Features - apply now