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trandard Deviation Channels

[UPDATED] Metatrader 4 Tip 12 – How to use the Channel Standard Deviation

On the last trip, we saw how to use the ATR Forex indicator on Metatrader 4. Today, we will focus on learning how to use the Channel Standard Deviation on MT4.

The Channel Standard Deviation Forex Indicator is the way to measure the volatility based on statistical terms. When the Standard Deviation is changed, so does the width of the channel

Statistics tell us that 67% of the price plot points are expected to happen inside the Standard Deviation Channel if both (upper and lower) lines are plotted one standard deviation above and below the trendline.

This increases to 95% of the points If each line is increased to 2 deviations. If the price falls out of the channel, it is likely to move back unless a major trend reversal is taking place.

Standard Dev Channel

How to Add the Channel Standard Deviation on MT4

To Start, we navigate to the top menu. Go to Insert > Objects > Channels > StdDev Channel. Once there, we can create a channel by clicking and drawing the path with our mouse.

The Deviations value corresponds to the Standard Deviation value, which will mark the width of the channel

Two points must be taken, one for the start of the channel and one for the end.

The channel has a deviation of 1.8. This value is adjusted in a way that the superior line of the channel acts as a resistance of the pair price and the lower line acts as a support for the pair price.

When this channel is broken upwards, we’ll look for LONG positions. When the channel’s broken downwards, we’ll look for SHORT positions.

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