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 is a common strategy traders implement when using STARC Bands?

    Learn how technical analysts and traders develop buy/sell and long/short signals from Stoller Average Range Channels, or ... Read Answer >>
  2. Why are STARC Bands important for traders and analysts?

    Learn what STARC bands are and how the rationale behind their construction provides helpful indications for traders and market ... Read Answer >>
  3. What are the main differences between STARC Bands & Bollinger Bands®?

    Learn about the differences between Bollinger Bands and STARC Bands, two similar volatility band indicators used in technical ... Read Answer >>
  4. What are the best technical indicators that complement the STARC Bands?

    Discover some of the best technical indicators that can be used to complement a trading strategy designed primarily with ... Read Answer >>
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    Discover an intraday forex trading strategy that can be created using STARC bands in combination with daily pivot point levels ... Read Answer >>
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    Learn about different strategies using Bollinger Bands, and understand how the Bollinger Band is calculated using standard ... Read Answer >>
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