Indicator ((new)) — Fmcbr

Here is the "full story" behind this type of indicator, breaking down the name and its function.

2.3 Bollinger Bands

• Definition: Volatility bands placed two standard deviations above and below a simple moving average (typically 20-period SMA).
• Function in FMCBR: Provides a dynamic volatility envelope. The position of price (or the MACD line) relative to the bands is used to normalize momentum into a ratio.

Step 2: Compute Bollinger Bands (on the same price series)

• Calculate 20-period SMA of closing price.
• Calculate 20-period standard deviation.
• Upper BB = SMA(20) + (2 × StdDev).
• Lower BB = SMA(20) – (2 × StdDev).

4. The "Full Story" in Trading Strategy

Traders who use this indicator (under the Fisher/COG banner) use it for specific market conditions: fmcbr indicator

The Strategy:

1. Mean Reversion: The primary use is identifying when price has moved too far from its "center" (average). If the indicator hits an extreme high (overbought), it signals a "Long Cover" or "Short Entry." If it hits an extreme low (oversold), it signals a "Long Entry."
2. Crossovers: When the main line crosses the trigger line, it indicates a shift in momentum.
3. Divergence: If the price makes a higher high, but the indicator makes a lower high, it suggests the "gravity" of the trend is weakening, and a reversal is imminent.

2.2 MACD (Moving Average Convergence Divergence)

• Definition: A trend-following momentum indicator showing the relationship between two moving averages of price (typically 12-period EMA and 26-period EMA), plotted with a signal line (9-period EMA of the MACD line).
• Function in FMCBR: Provides the directional bias and momentum strength. The histogram value is used as the core input for the ratio.