Standard Deviation Channel

Standard Deviation Channel
Two lines which are parallel to the Linear Regression Trendline correspond the Standard Deviation Channel. Their distance from LTR are x standard deviations.

Trading Standard Deviation Channels
Standard deviation channels are plotted at a set number of standard deviations around a linear regression line. They can be usefully applied to swing trading (as well as for detecting changes in momentum).

The Standard Deviation Channel consists of two parallel lines on either side of the Linear Regression Trendline. The lines are spaced x number of standard deviations above and below the Linear Regression Trendline.

If Standard Deviation Channels (SDC) are in the uptrend and SMA (Period 20 with OHLC/4) is in the same direction then I call that a uptrend..

The trading rules I will discuss here are based on an 8-bar short term volume and price oscillator period with a 1/1000 minimum price change and with an upper standard deviation channel at 1.5 and 1.3 at the lower side over a 100-day period.

The histogram in the lower window pane represents the normalized slope using the preferences specified below. A 13-period linear regression line with 2-standard deviation channels is drawn overlaying the candles in the upper pane.

See also: Standard Deviation, Channel, Trend, Standard, Indicator