Posted by forex at 7:21 AM
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1. Pull up a price chart of a stock. 'Candle stick' charts show the most information and are useful when using volatility-based trading methods since the candles show the open, high, low, and close prices in a visual fashion.
2. Apply the STARC and Bollinger Bands to the chart by selecting both from the indicator list. Each indicator is composed of a moving average, upper band and lower band. The upper and lower band should create an channel in which the stock price is moving. Both sets of bands will expand with increased volatility, and tighten with decreased volatility.
3. Edit the indicator setting to suit your needs. Each aspect can be altered for different trading styles, with larger values more suitable for longer-term trading, and smaller values more suitable for short-term trading. Common settings are a moving average of six (or higher) with Bollinger Bands at plus two standard deviations for the upper band, and minus two standard deviations for the lower bound. For STARC Bands, use an ATR of 14 with a multiplier factor of two to allow for market fluctuations.
4. Look for price to correct to a band while in a trend. Usually price movements occur inside the STARC and Bollinger Bands, but at times price will move sharply and touch or move outside of the bands. Trends are extremely important and you should avoid going against the trend. Therefore, in an uptrend, watch for corrections that move to the lower bands, as it's a sign the correction is likely over. In a downtrend, watch for moves higher that move to the upper bands, as it's a sign the market is likely ready to start going back lower. This occurs often with Bollinger Bands, but much less so with STARC Bands, therefore STARC Bands give fewer false signals.
5. Watch for the price to creep along an upper or lower band. During strong moves, the stock price will continually touch the upper bands in an uptrend, or the lower bands in a downtrend, which can indicate an acceleration of the current trend. Price will move along an upper or lower Bollinger Band quite often; it happens less frequently with STARC Bands.