This is also referred to as the normal distribution curve. Now, back to business You can also plot Standard Deviation for security prices. The mean is the intermediate value between the extremes. One month or twenty working days is the usual period used. Interpretation Major tops are typically accompanied by high volatility during the blow-off phase of a market, as investors become more and more nervous and ready to take profits.
Major bottoms are usually calmer, with low volatility , as the hopes for quick profits have faded.
The larger the difference between the closing prices and the average price, the higher the SD and volatility. Standard deviation is useful for investing in stock options, because it provides a measure of volatility. Further information Also see Average True Range , another volatility indicator .