1. What is Market Sigma?

Definition: Sigma (σ) represents standard deviation, a measure of market volatility or dispersion from the mean.

Purpose: This calculator helps traders and analysts quantify market risk and volatility for better decision making.

2. How Does the Sigma Calculator Work?

The calculator uses the formula:

Where:

• \( \sigma \) — Standard deviation (volatility measure)
• \( x_i \) — Individual data point (e.g., daily returns)
• \( \mu \) — Mean of all data points
• \( N \) — Number of data points

Explanation: It calculates how spread out the market data points are from their average value.

3. Importance of Sigma in Markets

Details: Higher sigma indicates greater volatility and risk. Traders use this to assess position sizing, stop-loss levels, and strategy performance.

4. Using the Calculator

Tips: Enter comma-separated market data (e.g., daily returns, price changes). The calculator will compute both mean and standard deviation.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a "high" sigma value?
A: Context matters, but generally σ > 2% daily is high for most equities, while σ > 5% is extremely volatile.

Q2: How many data points should I use?
A: For meaningful results, use at least 20 data points (e.g., 1 month of daily returns).

Q3: What's the difference between population and sample sigma?
A: This calculator uses population sigma (dividing by N). For sample sigma, divide by N-1.

Q4: Can I use this for non-market data?
A: Yes, this works for any numerical dataset where you want to measure dispersion.

Q5: How is sigma related to normal distribution?
A: In normal distributions, ~68% of data falls within ±1σ, ~95% within ±2σ, and ~99.7% within ±3σ.