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Forex Glossary

The Industry's Most Important Terms Explained

The forex industry is made up of countless definitions and it's easy to forget a few along the way. But because no forex education can be complete without a glossary of forex terms, we've compiled one which aims at explaining key definitions in the simplest way possible. This way, you'll never be lost or confused again!


Standard Deviation

It is a statistical term denoted by the Greek letter (sigma). It is calculated by the following steps:

  • Calculate the mean for a population of n prices (i.e. close)
  • Subtract each price from the mean and then square the result
  • Sum all squared differences and then divide by the population n
  • Take the square root of the above

Or

  • Square root of the sum of the squared difference from each closing price to the mean and then dividing by the population (i.e. number of prices).

Standard Deviation formula:

formula

  • 68% of the values (prices) will fall within the range of 1 standard deviation of the mean
  • 95% of the values (prices) will fall within the range of 2 standard deviations of the mean
  • 99.7% of the values (prices) will fall within the range of 3 standard deviations of the mean

Category: Technical Analysis

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