Welcome back,

Today, we will talk about an engaging yet most important indicator named Standard Deviation. It is a technical analysis tool that tells us about the upcoming trend of the market with the help of a chart. We are damn sure that you will find it useful. So let's give it a go.

Points to be covered:

Introduction
How to apply?
Settings.
How does it work?
Engagement with other indicators.
Its Pros and Cons.

Introduction

As you can guess by its name that this indicator shows us the deviation in the market. This indicates the size of the next move in the market at a particular time. The next move can be small, a strong bullish or strong bearish. It observes the most recent moves in the market and tells us the upcoming volatility in the market as an outcome.

How to apply

Firstly, go to your broker's account.
Open the chart of a stock(a stock you want to trade in)
Now, go on the indicators list and select Standard Deviation from it.
You can select index colours of your own choice.

Settings:

>Periods - 14

>Standard Deviation - 20

Here, the value '20' of standard deviation means to calculate the standard deviation over recent 20 periods.

Points to be noted:

If we place the value of standard deviation above '20' in the given chart then it will become less sensitive.
Whereas, if we place the value under '20' in the chart then it will become highly sensitive.

>Field - Close

>Moving Average Type - Simple

How does it work?

This indicator predicts the future move of the market just by measuring the volatility of an asset.
If the Standard Chart Deviation gives a high reading then it means that the market has just crossed a big market move and now the next volatility will going to be low.
If the Standard Chart Deviation gives us a low reading then it means that the market didn't cross a big move yet, so the volatility of the market may be high.
We usually place the standard deviation on 20 because it is more convenient.

Engagement with Other Indicators

We can place this indicator with other indicators at the same time on the chart. By doing so, we can have some good advantages. Let's take a look at them.

Advantages

Increment in chances of higher accuracy.
Proves to be very helpful in confirming.
Lessen the chances of making wrong decisions.

Pros and Cons

Pros

Easy to apply.
Easy to understand.
Higher Accuracy.
Easily engaged with other indicators.

Cons

Can not provide 100% accuracy.
Needs high attention.

Thank You,

Standard Deviation: A look back tool