STARC Bands Indicator is also the type of trend indicator. It was developed by a technical analyst Manning Stoller in the early 1980s. This indicator is used in classical trend trading where a range breakout is taken into account. This is a type of technical indicator which is created by plotting two bands. The first one is the upper band which is created by adding the value of the ATR (average true range). This is a popular indicator used by technical traders to the moving average. And the other is the lower band which is created by subtracting the value of the ATR or Average True Range from the Simple Moving Average.
Usage of the STARC Bands Indicator :
If traders want to know more about and also use the STARC Bands Indicator, then they can find it in the STUDIES section of Zerodha Kite. This indicator can also find out to the Kite Mobile App. The Period is 15 and we can set it high or low. The default Period is 15 and the MA Period is 5. We can change this values as per our need. The default Multiplier is 1.3 and we can set it also. The colour of the top, bottom and middle bands can also be changed. By default these colours are white.
You can attach this indicator on to any charts likes daily, weekly, monthly or intraday. Check the image below to understand how to attach the STARC Bands in HDFC Bank share price chart.
Formula of STARC Bands Indicator :
STARC bands (Stoller average range channels) are three bands forming a channel around simple moving average.
- Median band : SMA(n) = SMA(5).
- Upper band : SMA(n) + (ATR(m)*K) = SMA(5) + (ATR(15)*1,33).
- Lower band : SMA(n) – (ATR(m)*K) = SMA(5) – (ATR(15)*1,33).
Where the value of n is 5, m is 15 and k is 133.
How Traders Use STARC Bands Indicator :
This STARC Bands indicator is similar to Bollinger Bands. These bands are narrowing on the flat markets and widening on the volatile markets. This indicator has two functions. The main function is STARC Bands used as a signal which recommends opening buy or sell orders when the price crosses the borders of this indicator and this reason is one should wait till the price consolidates above or under the bands.
The other function is it also can be used as an indicator whether the price is overbought or oversold and in the order to do it index K should be moved from 3 to 1.33. In this reason test of the price of STARC bands means the price has reached extreme values and the probability of price swing is very high. In this situation, this signal should be accompanied by signals of oscillators pointing out oversold/overbought areas.
Categories: Technical Indicators