Projection Bands
Type
Trend follower (or as Projection Band Oscillator: Oscillator)
Short introduction
The envelope technique of projection bands was introduced by Mel Widner in 1995. In contrast to other band constructions such as Bollinger bands or Keltner channels, all prices are located within the bands, which is why the bands are usually viewed in the form of a derived oscillator together with extreme zones. The course of the projection bands is given by the end points of an adaptive n-period regression channel, i.e. the current n-period regression line is shifted up and down until all prices of the n-period period (in particular also the last ones) are included in the resulting channel.
Formula/calculation
Projection Bands
ProjHight(i) =Ht-i +SHt * i, for i = 0 .. n-1
ProjLowt(i) =Lt-i +SLt * i, for i = 0 .. n-1
PBUppert = Max {ProjHight(i) | i = 0 .. n-1 }
PBLowert = Min {ProjLowt(i) | i = 0 .. n-1 }
Projection Band Oscillator
PBO = 100 * (C - PBLower) / (PBUpper - PBLower)
PBOslow =EMAx (PBO)
Projection Bandwidth
PBW = 100 * (PBUpper - PBLower) / ((PBUpper + PBLower) / 2)
where:
SH = absolute slope of the n-period regression line for high prices per period
SL = absolute slope of the n-period regression line for low prices per period
ProjHigh(i) = projected high value from i periods ago
ProjLow(i) = projected low value from i periods ago
n = number of periods for regression and time period
x = number of periods for smoothing the slow variant
Statement/Interpretation
The following literature is recommended for the statement and interpretation of the projection bands:
- Widner, Mel: Signaling Change with Projection Bands, Technical Analysis of Stocks & Commodities, 1995
- Florek, Erich: New Trading Dimensions, FinanzBuch Verlag, 2000
- Müller, Thomas and Lindner, Wolfgang: The big book of technical indicators, TM Börsenverlag
Default setting
- n = 14
- x = 3 to 5
Basic trading systems
- Projection Band Oscillator (PBO)
The oscillator variant of the indicator was selected for this basic trading system of the projection bands. The default setting for the period is 14, for the (exponential) trigger 3. Two auxiliary lines are drawn at +75 and +25. The base trading system provides buy signals when the indicator crosses the trigger below the 25 line from bottom to top. It provides sell signals when it crosses the trigger above the 75 line from top to bottom.