Weighted Deviation as a More Responsive Dispersion Indicator

Summary

The document briefly defines weighted deviation as a deviation measure that applies linear weights at each calculation step. It distinguishes this construction from a built-in deviation calculation that uses a linearly weighted moving average as its averaging method, and says the weighted measure responds more quickly than standard deviation. Its only practical guidance is to use it as one would use another deviation indicator.

This is a terse description rather than a complete specification or trading study. It provides no formula, parameter choices, worked example, chart, or evidence quantifying the difference in responsiveness. It also does not explain how to interpret the measure, compare its scale with standard deviation, or apply it to entries, exits, or risk limits. Readers can take away the general idea of weighting observations linearly, but would need further documentation to reproduce the indicator consistently or assess its usefulness in a strategy.

Key ideas

• Weighted deviation applies linear weights throughout its calculation.
• The document distinguishes it from deviation calculated using a linearly weighted moving average method.
• It characterizes the measure as more responsive than standard deviation.
• The page gives no formula, example, or evidence to establish how the measure behaves in practice.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.