Description

• FBB are very similar to well popular Bollinger Bands
• It consist 2 lines around price, upper and lower band to act trigger line for breakout and breakdown
• It uses ATR (Average True Range) instead of SD as its volatility for upper & lower bandwidth
• ATR is Added & subtracted after multiplying with Fibonacci factor (1.618, 2.618, or 4.236) to moving average to give both band lines

Interpretation

• If stock is quite, the bands contract and indicates that breakout is due
• Upper and Lower Band act as resistance & support lines and should be used in similar form for trading decisions
• It helps primarily to identify periods of high-low volatility and periods when prices are at extreme and possibly unsustainable levels./li>

Default Parameters Used/Inputs

• Upper Band = Simple Moving Average + (factor*ATR)
• Lower Band = Moving Average – (factor*ATR)
• Factor – Either of the following can also be used (1.618, 2.618, or 4.236)

Returns/Output

Fibonnaci Bollinger bands showing breakouts and reversals as well as acting as support and resistance

Formula