Standard Deviation
Statistical measure of price dispersion around a mean; rising values indicate increasing volatility, falling values a tightening range.
Formula
σ = √(Σ(Pᵢ − P̄)² / n), where P̄ = SMA(n) of close
Standard Deviation as a standalone indicator plots the rolling standard deviation of closing prices over a user-defined period (typically 20). It rises when bars scatter widely around the average, and falls when prices cluster tightly.
Traders watch for SD compression followed by expansion as a volatility breakout signal — analogous to the Bollinger Squeeze. It is the mathematical engine inside Bollinger Bands and feeds into Bollinger Bandwidth. Unlike ATR, standard deviation does not account for gaps between sessions.
Related Terms
Average True Range (ATR)
Volatility measure averaging the greatest of: current high–low, current high–prior close, or current low–prior close over n periods (default 14).
IntermediateBollinger Bands
Volatility envelope drawn 2 standard deviations above and below a 20-period SMA; bands widen in volatile markets and contract during consolidation.
BeginnerBollinger Bandwidth
Measures the percentage width of Bollinger Bands relative to the middle band; extreme lows signal a volatility squeeze preceding a large move.
IntermediateChoppiness Index
Measures whether a market is trending (low values near 38.2) or range-bound / choppy (high values near 61.8) using ATR and the highest-high/lowest-low range.
Intermediate