Understanding Standard Deviation

In this video we cover the basics of standard deviation, which is used by investors to quantify their exposure to total risk. It is also used to determine a range of returns around the investment’s average return.

[nancyc]

thank you so much! I was so confused and this cleared it up!

[navketan]

Sir, I have traded this strategy for the last 10 years & it makes money.Please back test it & publish the results
NON DIRECTIONAL STRATEGY
You could test the strategy on instruments which have high liquidity & trade around the clock--let us say forex & high volume US indices to start with.All orders are Limit order & orders are entered end of each day based on closing prices(EOD).For Forex pairs end of NY session is END OF DAY
On A given instrument(say Eur/Usd) limit order is placed to buy(or sell) at A distance " D" which is (70% of average daily ATR) away from the closing price EOD.Take profit (TP) & stop loss (SL) distance is 50% of that distance (D)--every order is all complete order on the same ticket.Only one order/day on the instrument.Win or lose--no trader intervention, market decides when take profit or stop loss gets hit.On that instrument orders are entered on both sides, Long & short at the same time.
All open orders get cancelled at the end of that day & new orders are entered based again on end of day new prices.Orders are placed on multiple different currencies to diversify risk(both dollar pairs & cross currencies as well).Risk capital on any instrument is 1% of account equity only.
Rationale--Markets are random but fractal in nature.Distance travelled in a given time span is based on square root of time.TRADING EDGE comes from the fact that from End of day INITIAL price the TP is closer compared to SL & chances of hitting TP are higher than hitting SL--and when TP is hit, then stop loss order gets cancelled right away..If one month option is priced $1--then 4 month option should cost $2.Distance travelled in 4 months is square root of 4.Option premium formulas are not ALLperfect but billions of $$ trade based on that formula & market makers make $$, no matter where the market goes/or does not go.At the money Call & put cost the same--take your pick.
Thank you.