Bollinger Bands Width

The Bollinger Bands Width indicator measures the percentage difference between the upper and lower Bollinger Bands to visualize market volatility and identify periods of contraction or expansion.

Usage

The Usage section focuses on identifying volatility cycles. When the indicator is colored green, the Bollinger Bands are expanding, suggesting an increase in volatility and a potential trend development. When the indicator turns red, the bands are contracting relative to their average width, indicating a squeeze or a period of consolidation. Traders often look for transitions from red to green as a signal that a breakout may be occurring.

Details

The script calculates the standard Bollinger Bands using a simple moving average (SMA) and standard deviation. The width is derived using the formula: (Upper Band - Lower Band) * 100 / Lower Band. To determine whether the bands are expanding or contracting, the script compares the current width to a 5-period exponential moving average (EMA) of the width itself.

• Expansion: Current Width >= EMA of Width (Green)
• Contraction: Current Width < EMA of Width (Red)

Settings

• Source: The price data used for the calculation (typically the close).
• Length: The lookback period for the SMA and standard deviation calculation.
• Multiplier: The number of standard deviations to shift the bands from the basis line.

FAQ

How do I interpret the colors on the Bollinger Bands Width?

Green areas indicate that the bands are expanding (rising volatility), while red areas indicate that the bands are contracting (falling volatility).

What does a very low Bollinger Bands Width value mean?

A very low value indicates a "squeeze," which often precedes a significant price breakout in either direction as the market moves from a low-volatility state to a high-volatility state.

How can I access this indicator?

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