Standard Deviation in Forex
A clear definition of Standard Deviation, with practical context for reading markets and making better trading decisions.
Definition
Standard deviation is a statistical measure of how widely values are dispersed around their average. In markets, it is commonly used as a measure of return or price volatility.
High vs. Low Standard Deviation
A higher standard deviation means observations are more spread out from the average, indicating greater variability. A lower value means they are clustered more closely around the average.
Use in Technical Tools
Standard deviation is built into several market tools, including Bollinger Bands. It is also used in performance and risk statistics, where it measures total variability rather than direction.
Key Takeaway
Standard deviation measures dispersion. In trading, greater dispersion usually means greater volatility, not a specific bullish or bearish view.
Practical forex example
Why Standard Deviation matters
Understanding Standard Deviation helps traders interpret market information, plan decisions, and manage risk with more context.
Related forex terms
Turn the definition into trading skill.
Explore structured lessons and practical tools when you are ready to go further.