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Percent Bollinger Bands is a technical analysis indicator derived from the Bollinger Bands indicator, which was developed by John Bollinger. Bollinger Bands consists of three bands, the lower band, the middle band and the upper band. The middle band is an N-bar simple moving average (SMA), the lower band is an N-bar SMA shifted down by a number of N-bar standard deviations and the upper band is an N-bar SMA shifted up by a number of N-bar standard deviations.
The Percent Bollinger Bands produces only one line or time-series, it calculates the position of a security's price related to the Bollinger Bands range. It simply subtracts the Bollinger upper band from the Bollinger lower band (range) and then divides that number by the difference between the close price and the Bollinger lower band. A negative value indicates than the close price is lower than the Bollinger lower band.
The indicator gives buy signals (bullish) when it crosses the zero line from below; it gives sell signals when it crosses the zero line from above.
It is also possible to use the signal line, which is an N-bar simple moving average of the Percent Bollinger Bands indicator, instead of the zero line. Buy when the indicator crosses the signal line from below and sell when it crosses the signal line from above.
The indicator function name is "PBbands". It allows you to specify the number of period to use in the calculation of the Bollinger bands. The Bollinger bands indicator uses two standard deviations to shift up and down the simple moving average.
The Percent Bollinger Bands can be used in volatility trading and as a measure of a security's volatility.
