<p>Dispersion, in the context of trading, refers to the spread of prices around a central tendency. It's a measure of volatility, indicating how much prices deviate from their average. In other words, it's the range within which prices fluctuate.</p>

<h2>How It Works</h2>

<p>Dispersion is calculated using statistical methods. The most common is the standard deviation, which measures the average distance from the mean (average). Here's a simple breakdown:</p>

<ul>
  <li>Calculate the mean price of an asset over a period.</li>
  <li>Subtract the mean from each price, then square the result.</li>
  <li>Calculate the average of these squared differences.</li>
  <li>Take the square root of the result. This gives you the standard deviation, which is a measure of dispersion.</li>
</ul>

<p>High standard deviation indicates high dispersion, meaning prices are far from the mean. Low standard deviation indicates low dispersion, meaning prices are close to the mean.</p>

<h2>Why It Matters for Traders</h2>

<p>Dispersion is crucial for traders as it helps in:</p>

<ul>
  <li><strong>Risk Management</strong>: High dispersion means higher potential losses if the trade moves against you.</li>
  <li><strong>Profit Potential</strong>: High dispersion also means higher potential profits if the trade moves in your favor.</li>
  <li><strong>Strategy Selection</strong>: Different trading strategies perform better under different dispersion levels.</li>
</ul>

<h2>Example</h2>

<p>Consider two assets, A and B, both with a 7-day mean price of $100.</p>

<table>
  <tr>
    <th>Asset</th>
    <th>7-Day Mean Price</th>
    <th>Standard Deviation</th>
  </tr>
  <tr>
    <td>A</td>
    <td>$100</td>
    <td>$5</td>
  </tr>
  <tr>
    <td>B</td>
    <td>$100</td>
    <td>$20</td>
  </tr>
</table>

<p>Asset B has higher dispersion. This means its price is more volatile and could potentially move more in either direction, presenting both higher risk and higher reward opportunities for traders.</p>

<h2>Key Takeaways</h2>

<ul>
  <li>Dispersion measures the spread of prices around their average.</li>
  <li>It's a key indicator of volatility and risk.</li>
  <li>Traders use dispersion to manage risk, assess profit potential, and select strategies.</li>
  <li>Dispersion can be measured using tools like standard deviation, available on platforms like MetaTrader 5.</li>
</ul>