Bollinger Bands indicator(s) - cTrader

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Bollinger Bands are volatility based bands used to help identify situations where Prices are too High, or too Low, on a Relative bases. When Prices reach or rise above the Upper band, they are too High. When Prices reach or drop Below the Lower band, they are too Low.

Developed by John Bollinger in the early 1980’s. The Bollinger Bands are Volatility bands placed above and below a Moving Average. Volatility is based on the Standard Deviation, which changes as Volatility increases and decreases. The bands automatically widen when volatility increases and narrow when volatility decreases.

The Bollinger Bands consist of a Band of Three lines which are plotted in relation to security prices. The Line in the Middle is usually a Simple Moving Average (SMA) set to a period of 20 days (The type of trend line and period can be changed by the trader; however a 20 day Moving Average is by far the most popular).

The SMA then serves as a base for the Upper and Lower Bands. The Upper and Lower Bands are used as a way to measure Volatility by observing the relationship between the Bands and Price. Typically the Upper and Lower Bands are set to Two standard deviations away from the SMA (The Middle Line); however the Number of Standard Deviations can also be adjusted by the Trader.

The Bollinger Bands can also provide a unique assessment of volatility. Narrowing Bollinger Bands (i.e., when the bands move closer together) could suggest that volatility is decreasing—as investor sentiment potentially becomes more optimistic or complacent.



There are many ways to use Bollinger Bands. But it’s important to note that when the Price touches the Upper band, that doesn’t automatically mean Sell. Similarly, if the price touches the Lower band, that doesn’t necessarily mean Buy. In fact, take it from John Bollinger himself who said, "There is absolutely nothing about a tag of a band that in and of itself is a Signal."

This strategy is discussed by the man who created Bollinger Bands, John Bollinger :

Bollinger Band Breakout through Resistance Potential Buy Signal :
A trader might buy when price breaks above the upper Bollinger Band after a period of price consolidation. Other confirming indicators might likely be used by the trader, such looking for resistance to be broken; this is illustrated in the chart above of Wal-Mart stock.

Bollinger Band Breakout through Support Potential Sell Signal :
Similarly, a trader might sell when price breaks below the lower Bollinger Band. A trader might use other confirming indicators as well, such as a support line being broken; this is shown in the example above of Wal-Mart stock breaking below support.


In addition to these “High” and “Low” relative assessments, there are a number of trading signals that are generated by how the price of the stock or security interacts with the Bands. For example, when the stock breaks through the Upper band (a Resistance level), it generates a Buy signal. When it breaks below the Lower band (a Support level), it’s a Sell signal.

There are Three bands when using Bollinger Bands :
* Middle Band = 20-day simple moving average (SMA)
* Upper Band = 20-day SMA + (20-day standard deviation of price x 2)
* Lower Band = 20-day SMA - (20-day standard deviation of price x 2)

Settings can be adjusted to suit the characteristics of particular securities or trading styles. Bollinger recommends making small incremental adjustments to the Standard Deviation multiplier. Changing the number of periods for the moving average also affects the number of periods used to calculate the Standard Deviation.

Therefore, only small adjustments are required for the Standard Deviation multiplier.
An increase in the moving average period would automatically increase the number of periods used to calculate the standard deviation and would also warrant an increase in the standard deviation multiplier. With a 20-day SMA and 20-day Standard Deviation, the Standard Deviation multiplier is set at 2.0
Bollinger suggests Increasing the Standard Deviation multiplier to 2.1 for a 50-period SMA and Decreasing the Standard Deviation 'multiplier' to 1.9 for a 10-period SMA.

This Dynamic nature of Bollinger Bands also means they can be used on Different securities with the Standard settings.

For signals, Bollinger Bands can be used to identify M-Tops and W-Bottoms or to determine the Strength of the Trend.


Signal : W-Bottoms

W-Bottoms were part of Arthur Merrill's work that identified 16 Patterns with a basic W shape. Bollinger uses these various W patterns with Bollinger Bands to identify W-Bottoms. A “W-Bottom” forms in a Downtrend and involves Two reaction lows. In particular, Bollinger looks for W-Bottoms where the second low is lower than the first but holds above the lower band. There are four steps to confirm a W-Bottom with Bollinger Bands. First, a reaction low forms.

This Low is usually, but Not always, below the lower band. Second, there is a bounce towards the Middle band. Third, there is a New price low in the security.
This Low holds above the lower band. The ability to hold above the Lower band on the test shows less Weakness on the last decline. Fourth, the pattern is confirmed with a Strong move off the second low and a Resistance break.


Signal : M-Tops

M-Tops were also part of Arthur Merrill's work that identified 16 patterns with a basic M shape. Bollinger uses these various M patterns with Bollinger Bands to identify M-Tops. According to Bollinger, Tops are usually more complicated and drawn out than bottoms. Double tops, Head and Shoulders patterns and Diamonds represent evolving Tops.

In its most basic form, an M-Top is similar to a double top. However, the reaction highs are Not always equal. The first high can be higher or lower than the second high. Bollinger suggests looking for signs of non-confirmation when a security is making new highs. This is basically the opposite of the W-Bottom.

A non-confirmation occurs with Three steps. First, a security creates a reaction high above the upper band. Second, there is a Pullback towards the Middle band. Third, prices move Above the prior high but fail to reach the Upper band. This is a Warning sign. The inability of the Second reaction high to reach the Upper band shows waning momentum, which can foreshadow a trend reversal. Final confirmation comes with a Support break or Bearish indicator signal.


Walking the Bands

Of course, just like with any indicator, there are exceptions to every rule and plenty of examples where what is expected to happen, does not happen.
Previously, it was mentioned that price breaking above the Upper Band or breaking below the Lower band could signify a Selling or Buying opportunity respectively. However this is Not always the case. “Walking the Bands” can occur in either a Strong Uptrend or a Strong Downtrend.


Signal : The Squeeze

Bollinger BandWidth is best known for identifying the Squeeze. This occurs when volatility falls to a very low level, as evidenced by the narrowing bands.
The upper and lower bands are based on the standard deviation, which is a measure of volatility. The bands narrow as price flattens or moves within a relatively narrow range.

The Theory is that periods of Low volatility are followed by periods of High volatility. Relatively narrow BandWidth (a.k.a. the Squeeze) can foreshadow a significant Advance or Decline. After a Squeeze, a price surge and subsequent band break signal the start of a New move. A New advance starts with a Squeeze and subsequent break Above the upper band. A New decline starts with a Squeeze and subsequent break below the Lower band.


Finally, Bollinger Bands are among the most reliable and potent trading indicators traders can choose from. They can be used to read the Trend strength, to time entries during Range markets and to find potential market tops. The indicator is also Not a Lagging indicator because it Always adjusts to Price Action in real time and uses Volatility to adjust to the Current environment.
These users thanked the author Tsar for the post:
Jimmy
Always looking the GREAT, never left GOOD Point...


Re: Bollinger Bands indicator(s) - cTrader

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Bollinger Bands Percent B


%B quantifies a security's price relative to the Upper and Lower Bollinger Band.

There are six basic relationship Levels :

%B equals 1 when price is at the upper band
%B equals 0 when price is at the lower band
%B is above 1 when price is above the upper band
%B is below 0 when price is below the lower band
%B is above .50 when price is above the middle band (20-day SMA)
%B is below .50 when price is below the middle band (20-day SMA)


%B can be used to identify Overbought and Oversold situations.

However, it is Important to know when to look for Overbought readings and when to look for Oversold readings.
As with most Momentum oscillators, it is Best to look for Short-term Oversold situations when the Medium-term trend is Up. And Short-term Overbought situations when the Medium-term trend is Down.

In other words, look for opportunities in the direction of the bigger trend, such as a pullback within a bigger uptrend. Define the bigger trend before looking for overbought or oversold readings.


Parameter :

Price
Period
Std Dev

MA Type -- type for MA

1. Simple
2, Exponential
3. Time Series
4. Triangular
5. VIDYA
6. Weighted
7. Wilder Smoothing


NOTE :
Can Add the 'Other Levels' in Levels ie. -0,25 ; -0.50 and 0.25 ; 0.50 etc.
Always looking the GREAT, never left GOOD Point...

Re: Bollinger Bands indicator(s) - cTrader

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BBands Volatility


This indicator show the Market volitality based on Bollinger Bands distance.


Parameter :

Price

- High
- Low
- Open
- Close

BBands Period
SD Multiplier

MA Type -- type for MA

1. Simple
2, Exponential
3. Time Series
4. Triangular
5. VIDYA
6. Weighted
7. Wilder Smoothing

Periods


NOTE :
Can Change the Other Colors for Lines ; High Volatility Bar & Low Volatility Bar
These users thanked the author Tsar for the post:
Jimmy
Always looking the GREAT, never left GOOD Point...


Re: Bollinger Bands indicator(s) - cTrader

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Squeeze Break


This indicator is based on a strategy mentioned in John Carter's book, 'Mastering the Trade'

The basic idea behind the strategy is that markets tend to move from periods of Low volatility to High volatility and vice versa.
The strategy aims to capture moves from low to high volatility. For gauging this he uses Two common indicators - Bollinger Bands and Keltner Channels.
He also uses the Momentum indicator to provide a trade bias as some as the Bollinger Bands come back outside the Keltner Channels.

The Squeeze Break indicator combines this into a signal indicator and has the following components :

1. A positive Green histogram means that the Bollinger Bands are outside the Keltner Channels and the market is lightly to be Trending or Volatile. The stronger the Histogram the stronger the directional price move.
2. A negative Red histogram means that the Bollinger Bands are inside the Keltner Channels and the Market is lightly to be Consolidating. The stronger the red Histogram the tighter price action is becoming.
3. Incorporated into the indicator is a Momentum indicator. According to the strategy J. Carter goes Long when the Bollinger Bands break outside the Keltner Bands and the Momentum indicator is above the Zero line. He goes Short when the Momentum indicator is below the Zero line.
4. This indicator tends to be Better with the Larger timeframes.


Parameter :

Bollinger Period
Bollinger Dev
Keltner Period
Keltner Mul
Momentum_Period


And can Change the Other Colors for Lines : Up, Down and Momentum
These users thanked the author Tsar for the post (total 3):
Jimmy, Antonio, alexm
Always looking the GREAT, never left GOOD Point...


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