Bollinger Percent B indicator is a technical indicator that quantifies the price of a security with respect to upper and lower limits of Bollinger Bands. We can have six relative relationships.
- %B is zero when the stock price is at the lower band.
- %B is 100 when the stock price is at upper band.
- %B is above 100 when the stock price goes above upper band.
- %B is below zero when the stock price goes below the lower band.
- %B is above 50 when the stock price goes above the middle band.
- %B is below 50 when the stock price goes below the middle band.
Bollinger percent B uses the 20-day simple moving average (SMA) and 2 standard deviations (stdev.) as default parameters like the Bollinger bands. Zerodha Kite can plot this indicator both in its web version and mobile app.
Bollinger Percent B Indicator Formula:
How to set up Bollinger %b in Zerodha Kite?
- Go to MarketWatch.
- Choose the stock you are going to trade.
- Right click on the stock and select chart from graphic icons.
- Chart window of the stock opens.
- Go to studies. Select studies.
- Go to Bollinger %b and click on it.
- A small window opens with default parameters of the indicator.
- Once the parameters are selected, the Done command is chosen, the parameters window goes off the screen and the indicator is plotted on stocks price.
- The default parameters are same as that of Bollinger bands as mentioned earlier.
Bollinger Percent B indicator in intraday –
- The indicator works well in all the time frames.
- The picture above shows State Bank of India (SBIN) stock price movement with respect to Bollinger %b.
- The chart shows 1 min. timeframe.
- The strategy shows the price trend. Understanding price trend from this indicator is important before creating a position.
- As can be seen in the picture above, a buy position is created when the Bollinger %b indicator goes up from below the zero line indicating price reversal.
- The buy position is closed when the Bollinger %b indicator tops above 100 line and starts coming down accompanied by downward movement of price. Or one can close buy position if the stock price comes down with the indicator coming down from a position near 100 line.
The Bollinger Percent B indicator works well in identifying a visual divergence between the price and the indicator (watch the image above). Traders can use this technical indicator for single usage as well as in combination with other indicators.
Partha, an engineer by education, is theoratically actively following the stock and commodity markets since 1990. He is an active trader since 2003. He has received formal education in future and options and quantum analysis. He is presently working on research oriented projects using Python and data analytics.