Description:
Moving Standard Deviation (MSD) is a popular technical analysis tool used by traders to measure the volatility of an asset’s price. MSD is a statistical measure that calculates the standard deviation of a specific period’s price data. It is known as “moving” because it is constantly updated as new price data becomes available. MSD is a crucial tool for traders as it helps them identify the level of risk associated with a particular trade.
Input Parameters:
- Dev. Length: Specifies the number of periods over which the std dev of price is calculated
- MA Length: Number of periods used in the calculation
- Multiplier: Adjusts the sensitivity of the deviation calculation
- MA Type: Select the moving average type such as EMA, SMA, or HullMA.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Identifying Trends: One way to use moving standard deviation is to identify trends in the market. When volatility is low, the moving standard deviation will be relatively small, indicating that prices are relatively stable. When volatility is high, the moving standard deviation will be larger, indicating that prices are fluctuating more dramatically.
- Setting Stop-Loss Orders: Another way to use moving standard deviation is to set stop-loss orders. A stop-loss order is an order to sell a security when it reaches a certain price, in order to limit losses. By using the moving standard deviation as a guide, you can set stop-loss orders that are appropriate for the current level of volatility.
- Generating Buy/Sell Signals: When prices approach the upper bound of the channel, it may indicate that the security is overbought and due for a price correction. Conversely, when prices approach the lower bound of the channel, it may indicate that the security is oversold and due for a rebound.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.