An oscillator type of indicator derived from the Bollinger Bands plotting the relative position of price to any of the three bands in the Bollinger Bands indicator.
Overview
The Bollinger Percent B (%b) takes the Bollinger bands, and plots the price relative these bands. As price goes from one band to another, this indicator is plotted as an oscillator.
The Bollinger Percent B equation:
Percent B = ((Close – Bollinger Lower Band) / (Bollinger Upper Band – Bollinger Lower Band))*100
Bollinger Percent B on the NZD/USD Daily Chart showing end of 2009 to April 2011
Source: VT Trader
Interpretation
If the close price is equal to the upper Bollinger Band, %b will be 100 (percent). If the close price is equal to the lower Bollinger Band, %b will be 0. A %b value of 50 means the close price is equal to the middle Bollinger Band, or at the moving average (mean).
As an oscillator the %b can provide divergence signals. A divergence simply means that although price action can push higher(lower), it was not able to break the volatility high(low), and is therefore signaling a slowdown and possible reversal.
