The Standard Deviation indicator measures market volatility by describing the range of fluctuations of quotes in relation to MA. The higher its rate, the higher the volatility that can be used for its own purposes. The formula of this indicator can be used for intermediate calculations of other signaling devices (for example, it is used in the Bollinger bands) or as an independent tool.

The procedure for calculating the standard deviation is as follows:

  • is the arithmetic mean of the sample. Moreover, the sample itself is determined by the user. For example, to calculate annual volatility, values ​​may be taken at the end of each month, week, or day. It is logical that the more data there is in the sample, the more accurate the calculation will be;
  • the arithmetic average obtained is subtracted from each sample number;
  • the result is alternately squared and folded;
  • The square root is taken from the total, which will be the standard deviation.

By itself, volatility does not allow to determine the further direction of the trend. Standard Deviation corrects this moment. It is believed that if its value is close to zero, then a surge will soon occur (true, which way is unknown). If the value is maximum relative to the last periods, then a decline should be expected.

Standard Deviation based trading strategy

The proposed strategy is based on the Juice New indicator, which is based on Standard Deviation. You can use another tool, the question is only in the correctly selected settings that correspond to the market. It is best to trade EUR / USD on the M15 timeframe.

Juice New Settings:

  • period = 7;
  • thresholdLevel = 120;
  • soSoLevel = 4;
  • levels: 0 and 120.

The most convenient time trading range is from 09.00 to 16.00 Eastern Standard Time. On Monday and Friday, it is better not to trade due to the unpredictability of the market.

Conditions for opening a buy position:

  • Juice New draws a green bar above the 120 level;
  • the candle on which the indicator draws a green bar should not only grow, but also have a body (the difference between the opening and closing prices) at least 3 points;
  • open a position on the next candle.

The length of the stop loss is 7-15 points. As soon as the profit rises to 7 points, the stop loss moves to a breakeven level and a trailing length of 7 points is set.

Conditions for opening a sell position:

  • Juice New draws a green bar above the 120 level;
  • the candle on which the indicator draws a green bar should not only be falling, but also have a body (the difference between the opening and closing prices) of at least 3 points;
  • open a trade on the next candle.

Exit position is similar to the previous option. In order not to tempt fate, it is better to work only on the first indicator of the day. The rest, as practice shows, may be false. The longer the signal candle, the better. For example, if the candle body is 20-30 points, you can increase the income limit to 15 points and set the trailing for the same amount. The strategy is conservative, but gives fairly accurate signals. Because we recommend to take it into service!

Leave a Reply

Your email address will not be published. Required fields are marked *