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Standard Deviation in Pine Script: A Quick Guide for Traders

· 2 min read
Pineify Team
Pineify Team

Standard deviation is a key statistical measure used in trading to understand price volatility and variability. Pine Script, TradingView's scripting language, offers a built-in function called ta.stdev that simplifies calculating standard deviation for any price series.

What is Standard Deviation in Trading?​

Standard deviation quantifies how much price data deviates from its average over a specific period. High standard deviation indicates greater volatility, while low values suggest stable prices. Traders use it to assess risk, identify breakout opportunities, and build volatility-based indicators.

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Using ta.stdev in Pine Script​

Pine Script's ta.stdev function calculates the standard deviation of a data series over a defined length. Its syntax is:

ta.stdev(source, length, biased)
  • source: The price data series (e.g., close, high, low).
  • length: Number of bars over which to calculate.
  • biased (optional): Boolean to choose biased (population) or unbiased (sample) calculation; defaults to true.

Example: Plotting Standard Deviation of Close Prices​

//@version=5
indicator("Standard Deviation Example")
plot(ta.stdev(close, 20))

This script plots the standard deviation of the closing prices over the last 20 bars, helping visualize volatility trends.

How ta.stdev Works Under the Hood​

The function calculates the simple moving average (SMA) of the source data, then computes squared deviations from this average for each bar. It sums these squared deviations and takes the square root of their average to find the standard deviation. This process can be replicated manually in Pine Script for customization, but ta.stdev handles it efficiently and ignores missing (na) values.

Practical Applications​

  • Volatility Bands: Combine standard deviation with moving averages to create Bollinger Bands or custom volatility bands.
  • Risk Management: Gauge market risk by monitoring changes in standard deviation.
  • Custom Indicators: Use standard deviation as a building block for advanced trading strategies.

For example, the "Standard Deviation [Vogaz]" indicator plots horizontal bands at multiples of standard deviation around the last candle's close, visually showing potential price ranges and volatility levels. It offers customizable multipliers, colors, and line settings to suit trader preferences.