Q: Tips

- StdDev thresholds are asset-specific — $100 StdDev is different for a $50K crypto vs. a $50 stock - Use percentage-based measures (like HV or BB_BANDWIDTH) for cross-asset comparison - StdDev is the building block of Bollinger Bands — understanding it improves BB analysis - Low StdDev periods are ideal for identifying potential breakout trades - Combine with directional indicators to determine which way the breakout might go - Consider using a moving average of StdDev to smooth out noise

Question 1

What is Standard Deviation?

Accepted Answer

Standard Deviation (StdDev) is a fundamental statistical measure of volatility that quantifies the dispersion of price data around its mean. In trading, it measures how much closing prices deviate from their average over a given period. Higher StdDev values indicate greater volatility (wider price swings), while lower values indicate calmer markets.

Question 2

How it works

Accepted Answer

Standard Deviation is calculated as the square root of the variance of closing prices: ``` Mean = Sum(Close[i], i=1..N) / N StdDev = sqrt(Sum((Close[i] - Mean)^2, i=1..N) / N) ``` Where N is the period (default 20). The result is in the same units as the price (e.g., dollars for stocks, USDT for crypto).

Question 3

Key features

Accepted Answer

- **Raw volatility measure** — Expressed in price units, shows absolute deviation from mean - **Building block** — Used internally by Bollinger Bands and other indicators - **No upper bound** — Can increase without limit during extreme volatility - **Mean-reverting** — High StdDev periods tend to be followed by low periods and vice versa - **Not normalized** — Cannot directly compare across different assets without adjustment

Question 4

Buy signals

Accepted Answer

- StdDev drops to historically low levels (squeeze — expect a breakout) - StdDev starts expanding while price moves up (healthy trend) - After a volatility spike, StdDev declines (panic subsiding, potential bottom)

Question 5

Sell signals

Accepted Answer

- StdDev spikes to extreme levels (climactic move, often near reversals) - StdDev is very high and starts contracting (trend exhaustion) - Rising StdDev with falling price (increasing panic selling)

Question 6

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | Number of candles for calculation |

Question 7

Example conditions

Accepted Answer

| Condition | Description | |-----------|-------------| | `STDDEV(20) > 100` | High volatility (StdDev above 100 price units) | | `STDDEV(20) < 20` | Low volatility (squeeze condition) | | `STDDEV(20) cross_over 50` | Volatility expanding | | `STDDEV(20) cross_under 50` | Volatility contracting |

Question 8

Tips

Accepted Answer

- StdDev thresholds are asset-specific — $100 StdDev is different for a $50K crypto vs. a $50 stock - Use percentage-based measures (like HV or BB_BANDWIDTH) for cross-asset comparison - StdDev is the building block of Bollinger Bands — understanding it improves BB analysis - Low StdDev periods are ideal for identifying potential breakout trades - Combine with directional indicators to determine which way the breakout might go - Consider using a moving average of StdDev to smooth out noise