Volume Weighted Standard Deviation

Volume Weighted Standard Deviation

The standard deviation is a measure of dispersion of a data set around its mean. This indicator uses a similar formula as the standard deviation indicator that comes with the default installation of NinjaTrader. However, all data points are volume weighted.

Indicator Description

Volume Weighted Standard Deviation is calculated from price data over the selected lookback period.

  1. We start with the calculation of the arithmetic mean of the input data.
  2. Then we find out how much the data points deviate from the arithmetic mean and calculate the squared differences.
  3. Next we calculate the variance as the volume weighted arithmetic mean of the squared differences.
  4. Finally the standard deviation is obtained as the square root of the variance.

The indicator calculates the uncorrected standard deviation from the volume weighted sample.

Other Library indicators

Other library indicators that utilize deviation bands for determining trading setups include the Fibonacci Bands, Projection Bands, Projection Bandwidth Residual Deviation Bands and our Squeeze Indicators. The Current Day Median and the DailyWeeklyMonthly and N Monthly VWAPs also fall into this category but are located under session tools.

The library also has a category for Channel Indicators, including the Donchian Channel, Gapless Keltner Channel, Keltner Channel, Raff Channel and the Linear Regression Channel / Daily Regression Channel. The Linear Regression Channel and the Donchian Channel were discussed in our Indicator Spotlight newsletter.

The Squeeze and VWAP trading setups were also discussed in the Indicator Spotlight newsletter. You may also want to review the Volatility Indicators category, specifically the Daily Range Projections, Weekly Range Projections and the Monthly Range Projections. The Indicator Spotlight also discussed the Daily Range Projections. Finally, you may have a look at our posts on the Ichimoku Cloud, the TDI Indicator and the daily Pivot Point Indicator.

The indicator is available for NinjaTrader 8 and we discussed the application in our blogpost on The Bollinger Bands Calculation: Building a Better Model.