Purpose: Sigma measures how far observed data deviates from the mean or average. Investors use standard deviation to gauge expected volatility, and is expressed with the lowercase Greek letter sigma (σ). The three-sigma rule, also known as the 68–95–99.7 rule, states that for a normal distribution, approximately 68% of data falls within one standard deviation of the mean, 95% within two, and 99.7% within three standard deviations. This rule is a fundamental concept in statistics used to understand data spread, identify outliers, and set expected limits.
Description:
Plots 4 levels of of sigma above and below a Yellow center line (mean).
Plots the price action strength or weakness above and below a midpoint value.
NinjaTrader Use:
Using standard tools in the NinjaTrader Indicators, this template displays 4 levels of sigma above and below the center line.
Colors, values, and styling can easily be custom fit by the user.
We can use this template for any time frame or even Volume Bars.
Practical Example:
On an ES chart we can see outer 4 sigma Bands represented as dots.
Sigma 2 is represented by a small gold dot.
Sigma 1 and 3 are represented by a solid line.
User should pay attention to the central yellow line for support and resistance ideas
Additionally, in our chart example we have the Awap for the time period plotted.
