Bollinger Bands Breakout Oscillator

The Bollinger Bands Breakout Oscillator is a powerful trading tool designed specifically for those looking to measure breakouts with Bollinger Bands. Through its innovative approach, the oscillator helps traders assess the significance of price movements relative to the extremities of the Bollinger Bands indicator.

Key Features and Settings

This indicator is informed by three main settings that greatly influence its performance:

• Length: Defines the period of the Bollinger Bands, determining how sensitive the oscillator will be to recent price movements.
• Mult: A multiplier that controls the width of the Bollinger Bands. Adjusting this can help traders fine-tune breakout sensitivity.
• Src: The input source of the indicator, allowing for customization based on different data inputs.

How to Trade the Bollinger Bands Breakout Oscillator?

The Bollinger Bands Breakout Oscillator generates two series by calculating the sum of the distances between the price and each Bollinger Band extremity when the price moves outside of these extremities. This sum is then divided by the sum of the absolute distance between price and its respective extremity, covering the most recent Length of bars.

• Bullish Breakouts: Indicated by green areas on the oscillator. These suggest an upward trend when this area is larger than the red, bearish area.
• Bearish Breakouts: Shown as red areas on the indicator, pointing to a potential downtrend when they surpass the bullish areas in size.

The magnitude of the breakout is linked to the amplitude of these colored areas. Larger areas correspond to significant breakouts and, potentially, stronger trends.

Advanced Usage Tips

Modifying the Mult setting will adjust the width of the Bollinger Bands, naturally affecting breakout frequency. A higher Mult means wider bands, resulting in fewer but potentially more substantial breakout signals. The images above demonstrate the oscillator with a multiplier of 2 in practice.

FAQs

1. How can this indicator improve my trading strategy?

By highlighting significant breakouts and trends, traders can better position themselves to capture profitable opportunities during both bullish and bearish market conditions.

2. What platforms support the Bollinger Bands Breakout Oscillator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

3. How should I choose the best Length and Mult for my trading?

The best settings depend on your trading style and market conditions. Shorter Lengths with lower Mult values might work better for aggressive traders, while conservative traders might opt for longer Lengths and higher Mult values for fewer but more reliable signals.