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--- In equismetastock@xxxxxxxxxxxxxxx, belice2003 <no_reply@xxxx>
wrote:
> Does anyone has the formula for Bomar Bands? Thanks!
belice,
This is straight from the Bollinger site. Discussion is about trading
bands then Bomars.
The procedure to create such a chart is straightforward. First,
calculate and plot the desired average. Then calculate the upper band
by multiplying the average by 1 plus the chosen percent (1 + 0.04 =
1.04). Next, calculate the lower band by multiplying the average by
the difference between 1 and the chosen percent (1 - 0.04 = 0.96).
Finally, plot the two bands. For the DJIA, the two most popular
averages are the 20- and 21-day averages and the most popular
percentages are in the 3.5 to 4.0 range.
The next major innovation came from Marc Chaikin of Bomar Securities
who, in attempting to find some way to have the market set the band
widths rather than the intuitive or random-choice approach used
before, suggested that the bands be constructed to contain a fixed
percentage of the data over the past year. Figure 3 depicts this
powerful and still very useful approach. He stuck with the 21-day
average and suggested that the bands ought to contain 85% of the
data. Thus, the bands are shifted up 3% and down by 2%. Bomar bands
were the result. The width of the bands is different for the upper
and lower bands. In a sustained bull move, the upper band width will
expand and the lower band width will contract. The opposite holds
true in a bear market. Not only does the total band width change
across time, the displacement around the average changes as well.
Preston
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