There are three different trading bands to display. These Trading Bands
work in conjunction with the
Moving Average Indicator.
The trading band consists of the point of maximum and minimum divergence from
the trend represented by the moving average. The default percentage is 10
percent of the moving average. You may need to change this variable to
accommodate the price movement of the different equities.
What you want to do here is come up with an envelope that will contain the
price movement of the equity being studied. This envelope should present
possible entry and exit points for individual issues. The price reaching the top
of the envelope would be an indication to sell or go short an equity.
Conversely, the price reaching the bottom of the trading band would be an
indication to buy or go long the equity. It should be noted here that using the
trading bands with a centered moving average will provide you with a more
accurate envelope to contain price action.
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