BOLLINGER BANDS %B INDICATOR

%B, short for Bollinger Bands %B, comes from the standard Bollinger Bands (BB) indicator. Bollinger Bands, a volatility indicator, consist of three lines based on a security's price: a 20-day Simple Moving Average as the Middle Line and the Upper and Lower Bands positioned around it, typically two standard deviations away.

%B quantifies price relative to these bands, helping in trend identification and trading signals, even detecting overbought or oversold conditions. For optimal results, focus on %B signals during robust uptrends or downtrends.

What makes Bollinger Bands %B valuable is its ability to refine the widely used Bollinger Bands (BB) indicator. It shifts from interpreting price relative to the Bands' appearance to precise values, empowering technical analysts to make informed choices.

BUY SETUP

For the buy setup,

        ● Wait for the %B to show the price is oversold. In this case, the indicator will dip below 0.

        ● Wait for the price to start rising and place your buy entry as per your strategy.

        ● Place your stop loss slightly below the previous low.

        ● Hold the position until the indicator shows the price is overbought by crossing above 1.

SELL SETUP

For the sell setup,

        ● Wait for the indicator to show the price is overbought by crossing above 1.

        ● Wait for the price to start declining and place your sell entry according to your strategy.

        ● Place your stop loss slightly above the previous high.

        ● Hold the position until the indicator crosses below 0 to show the price is oversold.

CONCLUSION

%B works best in well-established trends, where breaches above 1 and below 0 carry more significance. Still, using %B alongside other indicators and technical analysis methods is advisable to enhance trend confirmation.

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