Posted by forex at 4:32 AM
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1. Choose the time period for the bands. This will encompass the set of bars included in the calculations. A time period of 20 will use data from the previous 20 price bars to calculate the short-term upper and lower band limits for the current bar. Longer-term trading will better perform under bands using 80 bars or more.
2. Calculate the upper band plot point for the current bar by using the highest and lowest prices of the previous set of bars included in the calculation, according to the formula: (H*(1+2*((((H-L)/((H+L)/2))*1000)*0.001))) where H is the highest price reached and L is the lowest. Only include the highest and lowest price points of the previous number of bars desired by the bands' setting. For example, if using a 20-period acceleration band, the highest price during the preceding 20 bars is used as H in the formula.
3. Calculate the lower band plot point for the current bar by using the highest and lowest prices of the previous set of bars included in the calculation, according to the formula: (L*(1-2*((((H-L)/((H+L)/2))*1000)*0.001))) where H is the highest price reached and L is the lowest.
4. Repeat this calculation for each bar on the chart, and then connect the plot points with a line for both the upper band and the lower band. The result is an acceleration band through which the stock moves.