We would like to bring to notice of our users a pretty interesting binary options’ indicator that is called the Standard Deviation. This indicator sparks interest primarily for the fact that it doesn’t show a trend in the market, but monitors volatility. In other words, it is based on the principle that monitors the correlation between the price’s oscillations and the moving average. When the indicator’s line shows high values, we can conclude that volatility is growing in the market too. If the line’s value decreases, then volatility decreases too.
Description of Standard deviation binary options’ indicator
As mentioned above, this binary options’ indicator doesn’t show the trend’s direction, but describes the market’s volatility. The moving average is taken as the starting point, which is calculated either by closure prices or open prices. And the correlation is estimated.
It is necessary to note that the independent usage of this indicator is possible, but it is better if it is used, for example, as the auxiliary tool for the Bollinger Bands indicator. In this case, it will be possible to determine not only the trend, but also the fact that the oscillations’ range of quotes grows too.
The binary options’ indicator Standard Deviation is represented on a chart as the line that occasionally moves in either ascending or descending direction. When the indicator grows, it shows that volatility grows too. Therefore, when the indicator’s showings decrease, volatility decreases too.
Many traders erroneously believe that a rise of the indicator’s showings can be considered as the signal to buy the Call binary option. But in the reality it is not true. Growth of the indicator’s showings shows that the trade’s range will increase, but the growth of the certain financial tool will not be essentially observed.
How to apply Standard Deviation binary options’ indicator?
It is known that two market’s conditions exist: when it is in the active phase, and when it is tranquil. It can be also used when working with binary options. As we have already mentioned above, if the indicators’ showings are low, then the market is tranquil. But this is the time when market players wait until the changes which will lead to the volatility growth.
If the showings of the Standard Deviation binary options’ indicator had grown, then volatility in the market grew substantially too, and the market players wait for the change of the situation, in other words, they wait for the time when the market becomes tranquil again. Basically, if you have only this information, trading using this binary options’ indicator is fairly difficult.
But we have already focused on the fact that this indicator is best to be used in combination with others. For example, the Bollinger Bands tool will be perfectly suitable in these circumstances. In particular, it is natural that Bollinger Bands indicator is used as the main one, and in order to receiver clearer signals, you can also apply the Standard Deviation binary options’ indicator.
In order to but the Call binary option, it is needed to wait until the signal from the Bollinger Bands indicator is received. At the same time, you have to monitor the Standard Deviation tool thoroughly.
The same can be applied to the Put binary options’ purchase. When the appropriate signal from the Bollinger Bands indicator is received, it is desirable that a trader monitor the behavior of the Standard Deviation binary options’ indicator.