Measuring Deviation from the Mean

Standard deviation measures the dispersion of data points around their mean. In finance, it quantifies price volatility. A high standard deviation indicates prices fluctuate widely. A low standard dev

The Z-score quantifies a data point's distance from the mean. It measures this distance in standard deviation units. Traders use the Z-score to normalize price data. This normalization allows comparis

Bollinger Bands measure price volatility. John Bollinger developed them in the 1980s. They consist of three lines. A simple moving average (SMA) forms the middle band. An upper band and a lower band f

Keltner Channels define price deviation from a moving average. Chester Keltner introduced them in 1960. They use the Average True Range (ATR) to set band width. ATR measures volatility. This makes Kel

Percent rank measures a data point's position within a dataset. It expresses this position as a percentage. A percent rank of 90 means 90% of the data points fall below the current value. This contras

Mean Absolute Deviation (MAD) measures the average distance between each data point and the mean. It quantifies typical variation in a dataset. Traders use MAD to assess asset price volatility. They i

The Interquartile Range (IQR) measures statistical dispersion. It quantifies the spread of the middle 50% of data points. IQR offers a robust alternative to standard deviation. Standard deviation is s

Sigma events represent extreme price deviations. They measure how far a price moves from its mean, expressed in standard deviations. A 1-sigma event means the price moved one standard deviation from t

Mean reversion strategies identify asset prices deviating significantly from their historical average. Traders then bet on a return to that average. Defining "significant deviation" is central to thes

Financial assets rarely move in straight lines. They oscillate around a mean. Mean reversion strategies exploit this oscillation. A universal scoring system quantifies this deviation. This system allo