What the trader did not want to know how high can raise or lower the quote chosen for currency trading?Of course, we can not look into the future and find out for sure, but in this case a good help can be statistics.Knowing how to change the selected parameter in the past can be a great deal of confidence to calculate the degree of change in the future.And here we will help such an indicator as the standard deviation.This figure is also known as the standard deviation, standard variation, deviation.
Standard deviation is one of the most commonly used indicators in statistics and probability theory.It shows the measure of the dispersion of a random variable about its mathematical expectation.This number is expressed in the same units, in which measured itself a random variable.Consider how to determine the standard deviation.The formula for calculating this index is as follows:
STD = √ [(Σ (X-HSR) 2) / n], where
STD - standard deviation,
√ [] - square root,
XCP -the average value of the test parameters for the n-th number of cycles,
n - the total number of periods.
be taken into account when calculating a caveat.If n & gt; 30 as a denominator value used n-1.
standard deviation calculation is conveniently done using the application Excel, which is now found in almost every office computer.It uses the built-in formula STDEV.
Now let's talk about how you can use this indicator to trade.Standard deviation is a member of the technical indicators built into popular Terminal Metatrader, and shows the strength of price fluctuations relative to the moving average.In the case when its value reaches a new high, it means that at the moment the market characterized by high volatility and price quotes very scattered about the mean.If the indicator reaches a minimum, the market is waiting for, and prices of bars are rather close to expectations.Since the Forex market is characterized by succession of bursts of activity and quiet, this indicator can be used to predict the next period.
So, if it is at minimum, it will happen very soon, a surge of activity and price value can change dramatically.Typically, this happens before the release of important news, or when there is uncertainty in the market, and neither the bulls nor the bears can not reach a decisive advantage.At this time it is better to prepare for the opening of the order as soon as it becomes clear the future direction of the price movement, or pending orders open in both directions and wait until one of them does not work, and close second.
If the indicator starts off scale, it means that the activity of investors will soon fade away, and you should consider closing the position, as may soon happen correction or reversal.
standard deviation is often a part of other indicators.A striking example of this are the Bollinger Bands, where this value is used to determine the upper and lower boundaries of the motion quotes.These limits, together with the center line are the distinctive elements of support and resistance.So if the price is fixed above the average, you should expect that it will reach the upper limit, and vice versa if it will be in the lower range, it will seek to lower Bollinger line.
middle line of the display indicates the direction and strength of the trend.The larger the angle of this line makes with the X axis, the greater the force is gaining trend.At this time, the standard deviation starts increasing.Well, if it is almost parallel to the horizontal axis, then it shows the attenuation trends, the degree of variation is reduced, and the market goes into a state of rest, or waiting for the next important event.
