In High Low Bands Indicator or HLB, there are two bands surrounding the underlying’s price, and its generated from the triangular moving averages calculated from the underlying price. In this indicator, the triangular moving average is, in turn, shifted up and down by a fixed percentage.
What is the High Low Bands indicator?
Mainly concept of HLB is based on the triangular moving average. A triangular moving average takes into account, the average price of a specific stock over a particular period of time. In this indicator, triangular moving averages are a bit better than the rest of them because of their ability to generate sharp signals. A triangular moving average is smoother than the others because it is averaged twice. In indicators, this is a very simple indicator, but useful for both longs and shorts. This indicator plots the highest high and the lowest low along with the middle point between the two and also an exponential average of the mid-point of the last x periods.
This indicator is also available under the STUDIES section in Zerodha Kite. You can attach it to your chart using the default parameters. Check the example of Reliance Industries’ price chart in the Kite terminal.
In the High Low Bands indicator, the default period is 10 and the shift percentage is 5. You can change the color of the upper band, middle band, and lower band. The default colors are white for all.
How to trade using the High Low Bands indicator?
In High Low bands Indicator are some possibilities which can indicate the entry and exit for each trade:
- Buy longs if the upper band is higher than the previous value.
- Or if the midpoint changes the slope from down to up.
- Close longs if lower bands are lower than the previous value.
- Or if the midpoint changes from the slope from up to down.
- The same procedure is for shorts.
- Short sell if the lower band is lower than the previous value.
- Or if the midpoint changes the slope from up to down.
- Close shorts if upper bands are higher than the previous value.
- Or if the midpoint changes from the slope from down to up.
In this Indicator, High Low Bands are made up of the triangular moving average of a particular underlying. The triangular moving average for a specific time period is calculated. In this triangular moving average is moved up and down by a specific percentage according to the trader’s preference. This indicator of the two bands thus formed is termed HLB accordingly. The underlying trades inside this range most of the time. In this underlying breaks out of the band, this generates a signal accordingly. In this indicator, if the underlying pierces the High band on the upside, then we understand it to remain in an uptrend for a certain period of time. Similarly, if the underlying pierces the Low band on the downside, then we understand it to remain in a downtrend for a certain period of time.
Pros and Cons of High Low Bands Indicator
Pros:
- The High Low Bands Indicator can easily generate signals in trending markets.
- High Low bands are more inclined to price changes.
Cons:
- The High Low Bands Indicator doesn’t seem to work well in choppy or sideways markets.
- The HLB also has many numbers of waves than any other technical indicator.
- In Zerodha Kite, this indicator plots itself as a band at the end of the day time frame or above, in intraday time frames, this is just plotted as a line.
- So this indicator is useless in the intraday time frame.
FAQ
The high-low band indicator is a technical analysis tool used to visualize price volatility in stock or commodity markets. It helps identify potential support and resistance levels as well as potential entry points into the market.
The bands can be used in various ways to aid traders’ decision-making. For example, when the price falls outside of its normal range it can indicate an overbought or oversold condition in the market where a trader may have opportunities to capitalize on sudden movements upwards or downwards. Additionally, they may also be able to spot when prices move past preset thresholds of upper and lower bands which could provide an indication for them to enter or exit their directional positions accordingly.
High Low Band Indicator for TradingView is a piece of Pine script code that enables users to set up trade signals based on 2 bands. These bands are nothing but a triangular moving average shifted up and down by some percentages.
A Band Indicator helps traders gauge levels of support and resistance within the particular asset by setting desired thresholds within predetermined ranges. Bands are often denoted as a number of standard deviations away from a chosen moving average (like SMA/EMA). It allows traders to detect significant momentum changes that may develop either at short-term intervals (e.g. days trading interval) or long-term periods (weekly or monthly trend episodes).
Conclusion :
In this indicator, the whole concept of HLB lies upon the Triangular moving average. The High Low Bands Indicator, high and low bands are just wave-lines formed by shifting the triangular moving average by some specific percentage on both sides. Its nature is smooth which is the reason for this indicator being more responsive to price fluctuations. This indicator is most effective when it comes to trending markets. High-low Bands could easily generate signals in trending markets. Lastly, it is similar to all other indicators, failing in sideways or choppy markets.
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