A quantitative measure representing the amount of variation or dispersion from the average within a dataset of cryptocurrency market prices, returns, or other metrics. It quantifies the degree of spread or volatility in observed values.
Mechanism
Calculated commonly as standard deviation, which determines how much individual data points typically deviate from the mean. In financial contexts, it often serves as a proxy for volatility, indicating the expected range of price movements around an average.
Methodology
Applied extensively in risk management, portfolio optimization, and algorithmic trading to assess asset volatility and market predictability. Traders use statistical deviation to set stop-loss levels, determine option premiums, and calibrate the sensitivity of automated systems to price fluctuations, aiming to manage risk exposure effectively.
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