Description
The Standard Deviation Channel is composed of two lines parallel to the Linear Regression Trendline and distanced from it by specified number of standard deviations. Upper line is placed above the trendline; lower line, below.
According to statistical theory, 67% of the price plot points fall into Standard Deviation Channel if both upper and lower lines are plotted one standard deviation above and below the trendline. If the number of deviations is increased to two for each line, 95% of the points are expected to fall into the channel. If the price falls out of the channel, it is likely to move back unless a major trend reversal is taking place.
Input Parameters
| Parameter | Description |
|---|---|
price
|
The price used to calculate the Standard Deviation Channel. |
deviations
|
The number of standard deviations between the Linear Regression Trendline and channel lines. |
full range
|
Defines whether to plot the Standard Deviation Channel for the whole chart or for the specified number of last bars only. |
length
|
The number of last bars to calculate the Standard Deviation Channel for if full range input is set to "No".
|
Plots
| Plot | Description |
|---|---|
UpperLine
|
The upper border of the Standard Deviation Channel. |
MiddleLine
|
The Linear Regression Trendline. |
LowerLine
|
The lower border of the Standard Deviation Channel. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.