In trading, the Standard Deviation is commonly used as a technical indicator to assess an asset's price volatility. Specifically, it measures how much the price of an asset deviates from its mean (average) price. Traders use the Standard Deviation to understand the potential price fluctuations of a security. Higher Standard Deviation values indicate greater volatility, while lower values suggest more stability. The indicator is often used with other technical analysis tools to set risk parameters. A higher Standard Deviation might lead to broader stop-loss orders, indicating a higher level of risk, while a lower Standard Deviation might suggest narrower stops for a more conservative approach.
