Bollinger Bands %B indicator

Bollinger Bands %B is a technical analysis indicator that is based on the original Bollinger Bands indicator. It measures the position of the current closing price relative to the upper and lower bands of the Bollinger Bands.

The formula for Bollinger Bands %B is as follows: %B = (Closing Price - Lower Band) / (Upper Band - Lower Band)

In this formula, the closing price is the price at which the security closed at the end of the trading session. The upper and lower bands are the two standard deviations away from the moving average in the original Bollinger Bands formula.

The %B value ranges from 0 to 1. A %B value of 0 indicates that the closing price is at the lower band, while a %B value of 1 indicates that the closing price is at the upper band. A %B value of 0.5 indicates that the closing price is at the middle of the bands.

Traders use Bollinger Bands %B to identify potential buy and sell signals, as well as to monitor market volatility. When the %B value is above 0.5, it indicates that the closing price is above the middle of the bands and may be considered bullish. Conversely, when the %B value is below 0.5, it indicates that the closing price is below the middle of the bands and may be considered bearish.

Traders may also look for divergences between the %B indicator and the price action of the security. For example, if the security is making new highs, but the %B value is not increasing, it may be an indication of a potential trend reversal. Conversely, if the security is making new lows, but the %B value is not decreasing, it may indicate a potential bullish reversal.