Cracking Algo Trading in Cryptocurrencies – Hacker Noon

STATS 101: The 2 standard deviation deal

Bell Curve (Gaussian Distribution)

Any perfectly random variable follows the bell curve, which has an average value at the peak and a std. deviation that defines the spread of the distribution.

96% of the data points lie within 2-std. deviation above and below the average value.

By symmetry, the probability of the value dropping lower than ‘2-std. dev. below the average’ is less than 2%!

Crypto-asset prices are not perfectly random, but if they fall lower than ‘2-std. dev. below the average’ then there is a high chance that they will rise back towards the average value soon. At least the price graphs, shown previously, confirmed the same.

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