Acceleration Bands
Type
Other indicator
Short introduction
The acceleration bands were introduced by Price Headley as a an improvement of the Bollinger Bands. Acceleration bands measure volatility over a custom time period (for example, the last 20 periods). Around a centreline, smoothed by a MA, an upper and a lower band are drawn with the same distance to the centre.
Statement
The trading approach is based on a small fundamental basis and various breakout strategies. It is used for markets that promise high, sustained earnings growth and thus potentially longer trends. The basic strategy of these investments is to break out of narrow trading margins near all-time or 52-week highs.
With this indicator, it should be possible to detect a strong trend even before a strong price movement in this direction. As the name suggests, it relies on the concept of "acceleration" to generate entry and exit signals.
Formula/calculation
Upper band = ( High × ( 1 + 2 × (((( High - Low )÷(( High + Low ) ÷ 2 )) × 1000 ) × Factor )));
Lower band = ( Low × ( 1 - 2 × (((( High - Low )÷(( High + Low ) ÷ 2 )) × 1000 ) × Factor )));
The "Factor" and "Time period" parameters can be used to control the inertia and width of the bands.
Interpretation
If the price breaks through the upper band, this indicates a breakout to the upside and thus a buy signal. This long position can be closed out when "re-entering" the band (end of the acceleration phase). The same applies for the lower band.
As a rule, securities with high growth and growth markets in general are suitable for the use of this indicator.
Default setting
- Factor: 0.001
- Period: 20 periods
Example: Acceleration Bands
