## What Are Stoller Average Range Channel (STARC) Bands?

Commonly called STARC Bands, Stoller Average Range Channel Bands developed by Manning Stoller, are two bands that are applied above and below a simple moving average (SMA) of an asset's price. The upper band is created by adding the value of the average true range (ATR), or a multiple of it. The lower band is created by subtracting the value of the ATR from the SMA.

The channel created by the bands can provide traders with ideas on when to buy or sell. During an overall uptrend, buying near the lower band and selling near the top band is favorable, for example. STARC bands can provide insight for both ranging and trending markets.

### Key Takeaways

• During a rising trend, when prices are making overall higher highs and higher lows, it may be favorable to buy near the lower band (STARC Band-) and sell near the upper band (STARC Band+).
• During a downtrend, it may be favorable to short near the upper band and cover near the lower band.
• When bands are breached it can signal a trend change. For example, during an uptrend, if the price falls sharply through the lower band it could signal the uptrend is over.
• When the price action is choppy or ranging, the same general guidelines apply: favor buying near the lower band, selling near the upper band, and significant breaches of either band could mean the range is over.
• The SMA length is chosen by the trader and is typically between five and 10 periods.
• The trader can also choose how far above the SMA the upper and lower bands are, based on the ATR multiple. Placing the bands at +/- two ATR is common.

## The Formula for Stoller Average Range Channel (STARC) Bands

﻿ \begin{aligned} &\text{STARC Band}_+ = \text{SMA} + ( \text{Multiplier} \times \text{ATR} ) \\ &\text{STARC Band}_- = \text{SMA} - ( \text{Multiplier} \times \text{ATR} ) \\ &\textbf{where:} \\ &\text{SMA} = \text{Simple moving average, with length} \\ &\text{typically between five and 10 periods} \\ &\text{ATR} = \text{Average True Range} \\ &\text{Multiplier} = \text{Factor to apply to ATR -- two is common} \\ &\text{but can be adjusted for personal preference} \\ \end{aligned}﻿

## How to Calculate STARC Bands

1. Choose an SMA length. Five to 10 periods are common for STARC Bands.
2. Choose an ATR multiple. Two times ATR is common, although this can be adjusted as needed.
3. Calculate the SMA.
4. Calculate the ATR, and then multiply it by the multiple chosen.
5. Add the ATR x multiple to the SMA to get STARC Band+.
6. Subtract the ATR x multiple from the SMA to get STARC Band-.
7. Calculate the new values as each period ends.

## What Do STARC Bands Tell You?

STARC bands are a type of envelope channel that provides potential support and resistance levels.

STARC bands follow a basic price channel trading methodology. The top band is considered to show the security’s resistance price level and the bottom band is considered to show the security’s support price level.

The basic trading strategy is to sell when the security’s price is near the resistance band and buy when the security’s price is near the support band. Favor this strategy when the price is in an overall uptrend or when the price is ranging. When the price is in an overall downtrend, favor shorting near the upper resistance band and covering near the lower support band.

One thing to be aware of is that the price can move along a band for extended periods of time. This may mean a trade that looks good at the moment could turn out to be quite poor as the price continues to move along the band. For example, imagine selling a long position when the price reaches the upper band, only to watch as the price and upper band continue to move higher for some time.

Traders can use various average true range multipliers to influence the width of the bands. The larger the multiple the wider the bands. The smaller the multiple the tighter the bands. Longer-term traders may prefer wider bands while shorter-term traders may prefer narrow bands in order to potentially catch more trading opportunities.

## Difference Between STARC Bands and Bollinger Bands®

STARC bands and Bollinger Bands® are similar in that they create bands around a simple moving average. STARC bands add and subtract an ATR multiple to form the bands. Bollinger Bands® add and subtract a standard deviation multiple to form the upper and lower bands. The interpretation of the bands is similar, but the calculations are different. Therefore, the two indicators will look slightly different on a chart.

## Limitations of Using STARC Bands

While STARC bands can be used to signal potential trading opportunities near the bands, the main problem is that the bands are always moving. Buying near the lower band may look good, but if the lower band and price keep dropping then the signal provided was poor. This will happen frequently, as the price will reach a band but then the band keeps moving in that direction.

To help remedy this issue, utilize stop losses when taking trades near the bands, as this will help control risk if the price keeps moving against the position. Also, instead of taking profits when the price reaches a band, consider a tight trailing stop loss instead. This allows for the price to continue moving along the band, which increases profit. If the price does reverse, a profit is still locked in.