STARC Bands

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 and interpretation to Bollinger Bands®.

STARC is an acronym for Stoller Average Range Channels. The indicator is named after its creator, Manning Stoller.

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RELATED FAQS
  1. What are the best technical indicators that complement the STARC Bands?

    Some of the best technical indicators to complement use of the STARC bands are other oscillators or momentum indicators and ... Read Full Answer >>
  2. What is a common strategy traders implement when using STARC Bands?

    Stoller Average Range Channels (or STARC), Bands were created by Manning Stoller in the 1980s to help generate trading signals ... Read Full Answer >>
  3. Why are STARC Bands important for traders and analysts?

    STARC bands, or Stoller average range channels, provide traders and market analysts with indications of the level of volatility ... Read Full Answer >>
  4. How do I use STARC Bands for creating a forex trading strategy?

    STARC bands are similar to Bollinger Bands in terms of forming a channel that expands or contracts in relation to price movement ... Read Full Answer >>
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