Bollinger Bands %b on Gold

What it shows

The %b line runs below the candles against guides at 1, 0.5 and 0, which stand for the upper band, the middle line and the lower band. The strip between 0 and 1 is shaded, so any stretch of line outside it is price outside the bands.

How Pravex works it out

1. Take the simple average of the source over the last 20 candles. That is the middle band.
2. Measure the spread: the standard deviation of the source over the same candles. Square each gap from the average, divide the total by 20, take the square root.
3. Upper band = middle + 2 × spread. Lower band = middle − 2 × spread.
4. %b = (source − lower band) ÷ (upper band − lower band). If the two bands are equal, which happens on a perfectly flat window, there is no value.
5. Worked example with round numbers: with a lower band at 90 and an upper band at 110, a source of 105 gives (105 − 90) ÷ 20 = 0.75.

Settings

Setting	Default	What changing it does
Length	20	How many candles feed the average and the spread. A shorter length makes the bands hug price and the reading swing more; a longer one moves slowly.
Source	Close	The price that is placed between the bands. Switching to (H + L)/2 places the candle’s midpoint instead, which ignores where a spiky close landed.
Band width in standard deviations	2	How many spreads away from the middle the bands sit. A larger number pushes the bands out, so readings reach 0 and 1 less often.

How traders read it

A reading at 1 is a touch of the upper band and 0 a touch of the lower one. They locate price, they do not give orders. In a steady gold climb %b can hug 1 for many candles.

A poke above 1 that falls back under it on the next candle is price leaving the band and being pulled back in. The 0.5 guide splits the range: above it, price is trading in the upper half of the bands.

Because %b is a ratio, it lets you compare the position inside the bands on different timeframes without the price scale getting in the way.

When it misleads

The bands use the recent spread, so after a long quiet stretch a single normal move can push %b past 1 with no real change in trend. During a strong run, readings above 1 repeat and tell you little. On gold, a calm stretch of small candles leaves a narrow spread, so %b swings between its extremes on moves that look tiny on the chart. Gold trades about 23 hours on weekdays, with no weekend candles, so Monday’s first reading starts from Friday’s spread.

Questions and answers

Can %b go below 0?

Yes. Below 0 the source has closed under the lower band, by a fraction of the band gap. A reading of −0.2 means a fifth of that gap below it.

Is a %b over 1 a sell signal?

Not by itself. Over 1, price has closed beyond the upper band, which is a stretched move against the recent spread, and gold can keep closing out there for a whole trending session.

What is the difference between %b and Bollinger BandWidth?

%b says where price is inside the bands. BandWidth says how far apart the bands are. One is position, the other is size.

Should %b match my Bollinger Bands settings?

Yes, if you read both together. With the same length and band width, a %b of 1 lines up with a touch of the bands you see on the price pane. Both start at 20 candles and 2 standard deviations.

Related: Bollinger BandWidth, Relative Volatility Index, Bollinger Bands, every indicator.