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Here's how to read and use the standard deviation indicator in trading

When it comes to choosing a risky investment, market participants opt for stocks with higher standard deviation that provides volatility, which can be used for quick profits.

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Standard Deviation can assist in determining the target price of a security

3 min read Last Updated : Oct 29 2020 | 8:58 AM IST

Standard Deviation measures the volatility of securities. It is computed as the square root of variance with respect to the mean price. In simple language, it helps one identify the spread or deviation of a price from the mean by considering the historical price data. Higher standard deviation means the price has deviated considerably from the mean price, while lower deviation signifies minor variation from the mean.

Generally, blue-chip / large-cap stocks have a lower standard deviation compared to illiquid or small-cap stocks. When it comes to choosing a risky investment, market participants opt for stocks with higher standard deviation

Topics : Chart Reading technical charts Buzzing stocks Market technicals technical analysis

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