Description

• Invented by Jon Anderson, this is envelopes with three lines which act upper, middle and lower band
• These bands are similar in appearance like Bollinger bands, but uses standard error as an input with a factor to get upper and lower band instead of standard deviation
• Its interpretation is quite different than other bands

Interpretation

• If bands are close together, it means that standard error is low and price is moving in trend
• If bands are wide, it means that price is losing its current direction and trend is ending

Default Parameters Used/Inputs

• Close Line
• Bars
• Factor
• Average Type
• Smoothing Bars

Returns/Output

Middle, Upper and Lower Band value of the stock

Formula

Mid Band = LstSqrAvg (Price)
Upper Band = Mid Band + factor*Standard Error
Lower Band = Mid Band - factor*Standard Error
Factor – It is the absolute number. E.g. 1,2,3 etc