- The outer bands are based on the standard deviation of price fluctuations. Which means that the longer the are, the wider the outer bands move away from each other.
- are most commonly used as a trend-following indicator. When the price stays close to the outer bands, it signals a strong trending market.
- can also be used to find reversal trading opportunities, especially when the price fails to hit the outer bands after a trending period and then turns to the opposite side of the bands.
- The Channel is based on the ATR ( ) indicator. Thus, the Channel projects the true width of the price range.
- Similarly to the , the Channel signals a strong trending market when the price is able to reach the outer bands. Such a signal confirms that the current price move exceeds the length of the previous price movements
- When the price fails to reach the outer band, it signals that the price movements are becoming shorter.
Some rules that can be used for trading
For long : when we close above the upper band. we exit when we close down the middle band.
For short: when we close below the lower band , we exit when close above the middle band.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
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