The Internal Bar Strength (IBS) indicator is a technical analysis tool developed by quant trader Larry Connors. It measures the relative position of a stock's closing price within its daily range, providing insight into short-term market strength or weakness. The formula for IBS is: IBS=(Close−Low)/(High−Low). This results in a value between 0 and 1, with values close to 1 indicating that the stock closed near its high for the day and values close to 0 suggesting it closed near its low. Traders use IBS primarily for mean-reversion strategies, as extreme values (close to 0 or 1) often signal short-term overbought or oversold conditions. For example, when the IBS is low (near 0), it can indicate a potential buying opportunity, as prices may rebound in the short term. Conversely, when the IBS is high (near 1), it could signal a selling opportunity, as prices may fall.
