DEFINITION of 'STARC Bands'
A type of technical indicator that is created by plotting two bands around a short-term simple moving average (SMA) of an underlying asset's price. The upper band is created by adding a value of the average true range (ATR) - a popular indicator used by technical traders - to the moving average. The lower band is created by subtracting a value of the ATR from the SMA.
Upper STARC band = SMA + ATR*
Lower STARC band = SMA - ATR*
* The average true range (ATR) is generally multiplied by a user-specific multiplier factor before being added/subtracted from the SMA.
BREAKING DOWN 'STARC Bands'
Most traders use a move toward the upper band to signal an increased probability that the price will pull back toward the moving average, and a move toward the lower band as a signal that the price may head back higher. Other traders believe a move beyond the bands signals an increase in momentum. STARC bands generally use a six-period moving average, and the average true range factor is usually multiplied by two before being added/subtracted from the SMA.
This indicator is similar in calculation to Bollinger Bands®.
STARC is an acronym for Stoller Average Range Channels. The indicator is named after its creator, Manning Stoller.