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I was wondering about whether the indicator in the chart was showing a percentage. I guess I should have pushed on a bit, but the formula given was just for standard deviation by itself....
You are correct in your assumption that all data points are known. However, the data points are not the 20 bar closes that you mention, but all transactions that occured during the period represented by the 20 bar. This clearly shows that you only use a meagre sample of all trades to approximate the standard deviation.
To calculate the correct standard deviation, you should use unfiltered tick data and then calculate the standard deviation from the full population.
But even if you do not have full resolution tick data available, but only have the OHLC and volume data from the last 20 bars, you can do much better than calculating the standard deviation from the closes:
-> first of all you can take into account the volume of each of the 20 bars
-> also the bar close should be replaced with a better price such (open + high + low + close)/4
The chart below shows how a modified calculation of the standard deviation which uses 80 sample points and takes into account volume (blue plot) gives us a better approximation of the population standard deviation than the simple formula based on 20 closes (orange plot).