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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    Learn what STARC bands are and how the rationale behind their construction provides helpful indications for traders and market ... Read Answer >>
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    Learn about the differences between Bollinger Bands and STARC Bands, two similar volatility band indicators used in technical ... Read Answer >>
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