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’s price. In this indicator, the triangular moving average is, in turn, shifted up and down by a fixed percentage. 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 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.
In High Low bands Indicator are some possibilities which can indicate the in and out for each trade:
- Buy longs if the upper band is higher than the previous value.
- Or if the mid point changes the slope from down to up.
- Close longs if lower bands is lower than previous value.
- Or if midpoint changes from the slope from up to down.
- The same procedure for shorts.
This indicator is also available under the STUDIES section in Zerodha Kite. You can attach it in your chart using the default parameters. Check the example of Reliance Industries price chart in Kite terminal.
In High Low Bands indicator, the period is 10 and shift percentage is 5. In this Indicator, High Low Bands is 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 the two bands, thus formed are termed as HLB accordingly. The underlying trades inside this range for most of the time. In this underlying breaks out of the band, a signal is generated accordingly. In this indicator if the underlying pierces the High band on the upside, then it is said to remain in an uptrend for a certain period of time, and vice-versa.
Advantages of this indicator :
- The High Low Bands Indicator can easily generate signals in trending markets.
- High Low bands are more inclined to price changes.
Disadvantages of this indicator :
- The High Low Bands Indicator don’t seem to work well in choppy or sideways markets.
- The High Low Bands also have much more number of waves than any other technical indicator.
- In Zerodha Kite, this indicator plots itself as a band in daily time frame or above, in intraday time frames, this is just plotted as a line.
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 the sides and it’s nature is smooth that is the reason of this indicator is 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. It is similar to all other indicators, fail in sideways or choppy markets.
Categories: Technical Indicators