A type of technical indicator that is created by plotting two bands around a short-term simple moving average (SMA) of an underlying asset's price. The upper band is created by adding a value of the average true range (ATR) - a popular indicator used by technical traders - to the moving average. The lower band is created by subtracting a value of the ATR from the SMA.

Upper STARC band = SMA + ATR*
Lower STARC band = SMA - ATR*

* The average true range (ATR) is generally multiplied by a user-specific multiplier factor before being added/subtracted from the SMA.

Most traders use a move toward the upper band to signal an increased probability that the price will pull back toward the moving average, and a move toward the lower band as a signal that the price may head back higher. Other traders believe a move beyond the bands signals an increase in momentum. STARC bands generally use a six-period moving average, and the average true range factor is usually multiplied by two before being added/subtracted from the SMA.

This indicator is similar in calculation and interpretation to Bollinger Bands.

STARC is an acronym for Stoller Average Range Channels. The indicator is named after its creator, Manning Stoller.

Investment dictionary. . 2012.

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