Standard Deviation
A statistical measure of how spread out data points are from the mean — in trading, it quantifies price volatility.
Explained Simply
Standard deviation measures dispersion. A stock with a 2% daily standard deviation means its daily returns typically fall within +/-2% about 68% of the time, and within +/-4% about 95% of the time. Higher standard deviation = more volatile = larger expected price swings. It's the building block for Bollinger Bands, options pricing (Black-Scholes), and risk metrics like Sharpe ratio. Annualized volatility is daily standard deviation multiplied by the square root of 252 (trading days).
How Tradewink Uses Standard Deviation
Standard deviation powers Bollinger Band calculations, the VolatilityStrategyEngine's regime detection, and options pricing models. The AI uses rolling standard deviation to detect volatility regime shifts — a sudden increase in daily standard deviation often precedes significant moves. It also informs position sizing: higher standard deviation means smaller positions to maintain consistent dollar risk.
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See Standard Deviation in action
Tradewink uses standard deviation as part of its AI trading signal pipeline. Start getting signals that use this concept to find real opportunities.