Theory Behind Kirshenbaum Bands
What Are Kirshenbaum Bands?
The Kirshenbaum Bands, coined by Paul Kirshenbaum, offer a unique approach to trading analysis. They calculate the range based on the standard error derived from a hypothetical linear regression line. This range is then added to and subtracted from an exponential moving average (EMA) of the price, creating both an upper and a lower band.
For a twist on the original concept, you can select from four different types of moving averages instead of sticking solely with the EMA. Here’s the list of alternatives you can use:
- Simple Moving Average (SMA)
- Exponential Moving Average (EMA)
- Smoothed Moving Average (SMMA)
- Linear Weighted Moving Average (LWMA)
How to Use Kirshenbaum Bands
These bands can be utilized similarly to Bollinger Bands. They help traders identify potential price movements and market volatility. So, if you're already familiar with Bollinger Bands, you’ll find it easy to incorporate Kirshenbaum Bands into your trading strategy.
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