Bollinger %B: where price sits inside the bands, as a number

What it measures

%B expresses where price sits between the Bollinger bands as a single number: zero at the lower band, one at the upper, and 0.5 at the basis.

It carries the same information the bands do, in a form that can be compared, ranked and screened — which a visual band position cannot.

Values outside zero and one are ordinary: they simply mean price has moved beyond the band.

Because it is a single number rather than a picture, %B is what makes Bollinger logic usable in a screen, a formula or an alert. A condition like "%B above one" is expressible; "price touching the upper band" is not, without recomputing the bands.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute the Bollinger bands in the usual way.

2. 2

   Take the distance from the lower band to the close.

3. 3

   Divide by the distance between the bands.

Settings

It inherits the Bollinger period and multiplier and has none of its own. Changing the multiplier rescales %B without changing what it measures, so a threshold tuned at two deviations will be wrong at two and a half even though the chart looks the same.

How to read it

• Above one means a close beyond the upper band, which in a trend is continuation rather than exhaustion.
• It is the natural way to ask "which instruments are extended relative to their own volatility" across a universe.
• Two instruments with identical %B are equally extended relative to themselves, regardless of price or volatility.
• It crosses 0.5 exactly when price crosses the basis, so the middle of the range carries the same information a moving-average cross does.
• Sustained readings above one during an advance are the band-walking condition, and they are continuation rather than exhaustion — the same reading that looks like a sell signal on a range chart is a hold signal on a trending one.

Where it misleads

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