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Bollinger Band Width PercentileIntroducing the Bollinger Band Width Percentile
Definitions :
Bollinger Band Width Percentile is derived from the Bollinger Band Width indicator.
It shows the percentage of bars over a specified lookback period that the Bollinger Band Width was less than the current Bollinger Band Width.
Bollinger Band Width is derived from the Bollinger Bands® indicator.
It quantitatively measures the width between the Upper and Lower Bands of the Bollinger Bands.
Bollinger Bands® is a volatility-based indicator.
It consists of three lines which are plotted in relation to a security's price.
The Middle Line is typically a Simple Moving Average.
The Upper and Lower Bands are typically 2 standard deviations above, and below the SMA (Middle Line).
Volatility is a statistical measure of the dispersion of returns for a given security or market index, measured by the standard deviation of logarithmic returns.
The Broad Concept :
Quoting Tradingview specifically for commonly noted limitations of the BBW indicator which I have based this indicator on....
“ Bollinger Bands Width (BBW) outputs a Percentage Difference between the Upper Band and the Lower Band.
This value is used to define the narrowness of the bands.
What needs to be understood however is that a trader cannot simply look at the BBW value and determine if the Band is truly narrow or not.
The significance of an instruments relative narrowness changes depending on the instrument or security in question.
What is considered narrow for one security may not be for another.
What is considered narrow for one security may even change within the scope of the same security depending on the timeframe.
In order to accurately gauge the significance of a narrowing of the bands, a technical analyst will need to research past BBW fluctuations and price performance to increase trading accuracy. ”
Here I present the Bollinger Band Width Percentile as a refinement of the BBW to somewhat overcome the limitations cited above.
Much of the work researching past BBW fluctuations, and making relative comparisons is done naturally by calculating the Bollinger Band Width Percentile.
This calculation also means that it can be read in a similar fashion across assets, greatly simplifying the interpretation of it.
Plotted Components of the Bollinger Band Width Percentile indicator :
Scale High
Mid Line
Scale Low
BBWP plot
Moving Average 1
Moving Average 2
Extreme High Alert
Extreme Low Alert
Bollinger Band Width Percentile Properties:
BBWP Length
The time period to be used in calculating the Moving average which creates the Basis for the BBW component of the BBWP.
Basis Type
The type of moving average to be used as the Basis for the BBW component of the BBWP.
BBWP Lookback
The lookback period to be used in calculating the BBWP itself.
BBWP Plot settings
The BBWP plot settings give a choice between a user defined solid color, and a choice of "Blue Green Red", or "Blue Red" spectrum palettes.
Moving Averages
Has 2 Optional User definable and adjustable moving averages of the BBWP.
Visual Alerts
Optional User adjustable High and low Signal columns.
How to read the BBWP :
A BBWP read of 95 % ... means that the current BBW level is greater than 95% of the lookback period.
A BBWP read of 5 % .... means that the current BBW level is lower than 95% of the lookback period.
Proposed interpretations :
When the BBWP gets above 90 % and particularly when it hits 100% ... this can be a signal that volatility is reaching a maximum and that a macro High or Low is about to be set.
When the BBWP gets below 10 % and particularly when it hits 0% ...... this can be a signal that volatility is reaching a minimum and that there could be a violent range breakout into a trending move.
When the BBWP hits a low level < 5 % and then gets above its moving average ...... this can be an early signal that a consolidation phase is ending and a trending move is beginning.
When the BBWP hits a high level > 95 % and then falls below its moving average ... this can be an early signal that a trending move is ending and a consolidation phase is beginning.
Essential knowledge :
The BBWP was designed with the daily timeframe in mind, but technical analysists may find use for it on other time frames also.
High and Low BBWP readings do not entail any direction bias.
Deeper Concepts :
In finance, “mean reversion” is the assumption that a financial instrument's price will tend to move towards the average price over time.
If we apply that same logic to volatility as represented here by the Bollinger band width percentile, the assumption is that the Bollinger band width percentile will tend to contract from extreme highs, and expand from extreme lows over time corresponding to repeated phases of contraction and expansion of volatility.
It is clear that for most assets there are periods of directional trending behavior followed by periods of “consolidation” ( trading sideways in a range ).
This often ends with a tightening range under reducing volume and volatility ( popularly known as “the squeeze” ).
The squeeze typically ends with a “breakout” from the range characterized by a rapid increase in volume, and volatility when price action again trends directionally, and the cycle repeats.
Typical Use Cases :
The Bollinger Band Width Percentile may be especially useful for Options traders, as it can provide a bias for when Options are relatively expensive, or inexpensive from a Volatility (Vega) perspective.
When the Bollinger Band Width Percentile is relatively high ( 85 percentile or above ) it may be more advantageous to be a net seller of Vega.
When the Bollinger Band Width Percentile is relatively low ( 15 percentile or below ) it may be advantageous to be net long Vega.
Here we examine a number of actionable signals on BTCUSD daily timeframe using the BBWP and a momentum oscillator ( using the TSI here but can equally be used with Bollinger bands, moving averages, or the traders preferred momentum oscillator ).
In this first case we will examine how a spot trader and an options trader could each use a low BBWP read to alert them to a good potential trade setup.
note: using a period of 30 for both the Bollinger bands and the BBWP period ( approximately a month ) and a BBWP lookback of 350 ( approximately a year )
As we see the Bollinger Bands have gradually contracted while price action trended down and the BBWP also fell consistently while below its moving average ( denoting falling volatility ) down to an extremely low level <5% until it broke above its moving average along with a break of range to the upside ( signaling the end of the consolidation at a low level and the beginning of a new trending move to the upside with expanding volatility).
In this next case we will continue to follow the price action presuming that the traders have taken or locked in profit at reasonable take profit levels from the previous trade setup.
Here we see the contraction of the Bollinger bands, and the BBWP alongside price action breaking below the BB Basis giving a warning that the trending move to the upside is likely over.
We then see the BBWP rising and getting above its moving average while price action fails to get above the BB Basis, likewise the TSI fails to get above its signal line and actually crosses below its zeroline.
The trader would normally take this as a signal that the next trending move could be to the downside.
The next trending move turns out to be a dramatic downside move which causes the BBWP to hit 100% signaling that volatility is likely to hit a maximum giving good opportunities for profitable trades to the skilled trader as outlined.
Limitations :
Here we will look at 2 cases where blindly taking BBWP signals could cause the trader to take a failed trade.
In this first example we will look at blindly taking a low volatility options trade
Low Volatility and corresponding low BBWP levels do not automatically mean there has to be expansion immediately, these periods of extreme low volatility can go on for quite some time.
In this second example we will look at blindly taking a high volatility spot short trade
High volatility and corresponding high BBWP levels do not automatically mean there has to be a macro high and contraction of volatility immediately, these periods of extreme high volatility can also go on for quite some time, hence the famous saying "The trend is your friend until the end of the trend" and lesser well known, but equally valid saying "never try to short the top of a parabolic blow off top"
Markets are variable and past performance is no guarantee of future results, this is not financial advice, I am not a financial advisor.
Final thoughts
The BBWP is an improvement over the BBW in my opinion, and is a novel, and useful addition to a Technical Analysts toolkit.
It is not a standalone indicator and is meant to be used in conjunction with other tools for direction bias, and Good Risk Management to base sound trades off.
John Bollinger has suggested using Bolliger bands, and its related indicators with two or three other non-correlated indicators that provide more direct market signals.
He believes it is crucial to use indicators based on different types of data.
Some of his favored technical techniques are moving average divergence/convergence (MACD), on-balance volume and relative strength index (RSI).
Thanks
Massive respect to John Bollinger, long-time technician of the markets, and legendary creator of both the Bollinger Bands® in the 1980´s, and the Bollinger band Width indicator in 2010 which this indicator is based on.
His work continues to inspire, decades after he brought the original Bollinger Bands to the market.
Much respect also to Eric Crown who gave me the fundamental knowledge of Technical Analysis, and Options trading. インジケーター
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VWMACDV2 w/Intraday Intensity Index Histogram & VBCB Hello traders! In this script i tried to combine Kıvanç Özbilgiç's Volume Based Coloured Bars, Volume Weighted Macd V2 and Intraday Intensity Index developed by Dave Bostian and added to Tradingview by Kıvanç Özbilgiç. Let's see what we got here;
VBCB, Paints candlestick bars according to the volume of that bar. Period is 30 by default. If you're trading stocks, 21 should be better.
Volume Weighted Macd V2, "Here in this version; Exponential Moving Averages used and Weighted by Volume instead of using only vwma (Volume Weighted Moving Averages)." Says, Kıvanç Özbilgiç.
III, "A technical indicator that approximates the volume of trading for a specified security in a given day. It is designed to help track the activity of institutional block traders and is calculated by subtracting the day's high and low from double the closing price, divided by the volume and multiplied by the difference between the high and the low."
*Histogram of vwmacd changes color according to the value of III. (Green if positive, yellow if negative value)*
VWMACD also comes with the values of 21,13,3... Which are fibonacci numbers and that's how i use it. You can always go back to the good old 26,12,9.
Other options according to the fibonacci numbers might be= 21,13,5-13,8,3-13,8,5... (For shorter terms of trading)
Trading combined with the bollinger bands is strongly advised for both VWMACD and III. VBCB is just the candy on top :)
Enjoy! インジケーター
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[KL] Bollinger bands + RSI StrategyThis strategy is based on two of my previous scripts, one called “RSI14 + 10”; the other one called “Bollinger Bands Consolidation”. At its core, it combines the main setups from each of those two scripts but excludes the auxiliary features that were considered as experimental. This strategy will identify periods of squeeze, and then enter long during consolidation with a trailing stop loss set.
Primary indicator will be the Bollinger Bands. By comparing the width of the BBs with the ATR of the same lookback period (i.e. 2 standard deviations of the 20 recent closing prices vs ATR(20) x2), we begin to look for confirmation for entry whenever the standard deviation of prices is less than the ATR. This can be seen visually in the plots (i.e. default gray lines representing ATRx2 relative to BB center line).
Confirmation for entry will be the RSIs (slow-14, and fast-10). If both are upward sloping, then we assume prices are in an uptrend and may eventually break above upper band. RSIs are typically in mid-range when prices are consolidating, therefore no need to measure it.
Exits will happen in two cases, (1) when trailing stop loss hits, or (2) when RSIs signal that the instrument is overbought. No. 1 is self-explanatory. No. 2 happens, when RSI14 reaches above 70 (can be changed), followed by RSI10 catching up and surpassing RSI14.
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Squeeze Momentum [Plus]The "Momentum" in this indicator is smoothed out using linear regression. The Momentum is what is displayed on the indicator as a histogram, its purpose is obvious (to show momentum).
What is a Squeeze? A squeeze occurs when Bollinger Bands tighten up enough to slip inside of Keltner Channels .
This is interpreted as price is compressing and building up energy before releasing it and making a big move.
Traditionally, John Carter's version uses 20 period SMAs as the basis lines on both the BB and the KC.
In this version, I've given the freedom to change this and try out different types of moving averages.
The original squeeze indicator had only one Squeeze setting, though this new one has three.
The gray dot Squeeze, call it a "low squeeze" or an "early squeeze" - this is the easiest Squeeze to form based on its settings.
The orange dot Squeeze is the original from the first Squeeze indicator.
And finally, the yellow dot squeeze, call it a "high squeeze" or "power squeeze" - is the most difficult to form and suggests price is under extreme levels of compression.
Now to explain the parameters:
Squeeze Input - This is just the source for the Squeeze to use, default value is closing price.
Length - This is the length of time used to calculate the Bollinger Bands and Keltner Channels .
Bollinger Bands Calculation Type - Selects the type of moving average used to create the Bollinger Bands .
Keltner Channel Calculation Type - Selects the type of moving average used to create the Keltner Channel.
Color Format - you to choose one of 5 different color schemes.
Draw Divergence - Self explanatory here, this will auto-draw divergence on the indicator.
Gray Background for Dark Mode - to make them more visually appealing.
Added ADX (Average Directional Index) that measure a trend’s strength. The higher the ADX value, the stronger the trend. The ADX line is white when it has a positive slope, otherwise it is gray. When the ADX has a very large dispersion with respect to the momentum histogram, increase the scale number.
Added "H (Hull Moving Average) Signal". Hull is a extremely responsive and smooth moving average created by Alan Hull in 2005. Have option to chose between 3 Hull variations.
Added "Williams Vix Fix" signal. The Vix is one of the most reliable indicators in history for finding market bottoms. The Williams Vix Fix is simply a code from Larry Williams creating almost identical results for creating the same ability the Vix has to all assets.
The VIX has always been much better at signaling bottoms than tops. Simple reason is when market falls retail traders panic and increase volatility, and professionals come in and capitalize on the situation. At market tops there is no one panicking... just liquidity drying up.
The FE green triangles are "Filtered Entries"
The AE green triangles are "Aggressive Filtered Entries" インジケーター
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Bollinger Band Calculation ToolIntroducing the Bollinger Band Calculation Tool
What are Bollinger Bands ?
According to Investopedia ....
"In the 1980s, John Bollinger, a long-time technician of the markets, developed the technique of using a moving average with two trading bands above and below it.
Unlike a percentage calculation from a normal moving average, Bollinger Bands® simply add and subtract a standard deviation calculation.
Standard deviation is a mathematical formula that measures volatility, showing how the stock price can vary from its true value.
By measuring price volatility, Bollinger Bands® adjust themselves to market conditions.
This is what makes them so handy for traders; they can find almost all of the price data needed between the two bands."
Classic interpretations of Bollinger bands from Fidelity Investments....
"When the bands tighten during a period of low volatility, it raises the likelihood of a sharp price move in either direction.
This may begin a trending move. Watch out for a false move in opposite direction which reverses before the proper trend begins.
When the bands separate by an unusual large amount, volatility increases and any existing trend may be ending.
Prices have a tendency to bounce within the bands' envelope, touching one band then moving to the other band.
You can use these swings to help identify potential profit targets.
For example, if a price bounces off the lower band and then crosses above the moving average, the upper band then becomes the profit target.
Price can exceed or hug a band envelope for prolonged periods during strong trends.
On divergence with a momentum oscillator, you may want to do additional research to determine if taking additional profits is appropriate for you.
A strong trend continuation can be expected when the price moves out of the bands.
However, if prices move immediately back inside the band, then the suggested strength is negated."
This indicator contains a standard set of Bollinger Bands with the addition of a Test Closing Price calculation function.
It displays a standard set of Bollinger Bands by default.
How do I use the Test Closing Price function ?
Enter a test price in the Test Closing Price box in the settings, and then click the "Use Test Price" button.
The indicator will then replace the current Bollinger upper, lower and basis-lines with plots showing the resultant lines if price were to close at the Test Closing Price.
An information panel will appear which displays the test closing price and the resulting Bollinger-upper, Bollinger-lower and basis-line prices.
Can display up to 10 decimal places and has adjustable label offset.
It will also plot lines outlining the resultant closed candle body for clarity.
To return to "Standard Bollingers" just click off the "Use Test Price" button.
Knowing exactly what the Bollinger bands and Basis will do if a particular closing price is met can be useful in a variety of ways to traders who use Bollinger Bands® in their trading.
It is possible to work out exactly what closing price is required to get above or below a Bollinger band which is normally difficult as Bollingers react to the change in price.
Users can also experiment with different Test Closing Prices [/i to see exactly what effect this would have on the Basis moving average and on the Bollinger bands themselves. インジケーター
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