Using Deviation Ratio as an Activity and Threshold-Crossing Indicator
Summary
The deviation ratio is described as a measure derived from two standard deviations, expressed as a ratio between them. The document presents it as an activity indicator: it can highlight periods of elevated market activity, but does not show whether prices are moving up or down. It therefore suggests pairing the measure with price action or other indicators before interpreting conditions.
The listed signal ideas focus on how the ratio behaves around a threshold: crossing above or below it, or turning downward after moving above it. A reading below the threshold is also associated with the possibility of a trending market. These are qualitative suggestions rather than a fully specified trading system; the document provides no formula details, threshold calibration, examples, or performance evidence. Traders would need to define the calculation and test signals in the relevant market and timeframe before relying on them.
Key ideas
- The indicator is defined as a ratio between two standard deviations.
- It signals activity levels but does not identify price direction.
- Potential signals include threshold crossings and a downward slope reversal after an above-threshold reading.
- A below-threshold reading is described as possibly consistent with a trending market.
- The document offers no calculation details, calibrated thresholds, or empirical results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.