Bollinger Bands Width

The Bollinger Bands Width indicator provides a refined measure of market volatility by calculating the distance between the upper and lower Bollinger Bands relative to a basis line. It enhances the standard Bollinger Bands Width calculation with a dynamic baseline, customizable signal lines, and visual aids to help traders identify periods of expansion or contraction in market volatility.

Usage

The indicator can be used to identify volatility "squeezes" or high-volatility environments suitable for trend-following strategies. Users can filter signals by requiring the Bollinger Bands Width (BBW) to be rising, which highlights accelerating momentum.

• Volatility Thresholds: Use the baseline to determine a minimum volatility requirement. When the BBW is above the baseline, the market is considered sufficiently volatile for entry.
• Trend Identification: The signal line (e.g., Hull MA or VWMA) acts as a trigger. A crossover of the BBW above the signal line indicates increasing volatility.
• Visual Filters: Background and bar coloring can be toggled to highlight when volatility is above the baseline or above the signal line, providing instant visual confirmation.

Details

The script introduces a unique Baseline calculation inspired by Donchian Channels and dynamic averages. By calculating the average of various lookback periods (highest and lowest), it creates a "volatility floor." An adjustable divisor allows users to shift this floor; a higher divisor lowers the baseline, making the indicator more sensitive to volatility changes.

The Signal Line offers multiple moving average types (EMA, HMA, SMA, RMA, VWMA, WMA), allowing traders to smooth the BBW output according to their preference for speed versus lag.

Settings

Bollinger Bands Width Inputs

• Source: The price source used for the calculation (default is Close).
• Period: The lookback period for the standard Bollinger Bands.
• Require Rising Bollinger Bands Width: When enabled, highlights and signals only trigger if the BBW is currently increasing.

Baseline Inputs

• Baseline Period Type: Choose between a "RexDog Self-Adjusting" dynamic average or a "User Selected" fixed period.
• Period: The lookback period if "User Selected" is active.
• Divisor: Adjusts the sensitivity of the baseline; lower values raise the baseline (less sensitive), higher values lower it (more sensitive).

Signal Line Inputs

• Signal Type: Selection of moving average types (SMA, EMA, HMA, etc.) to apply to the BBW.
• Period: The smoothing period for the chosen signal line.

Visualization Options

• Color Bars/Background: Multiple groups of settings to toggle bar and background coloring based on basic BBW direction, baseline position, or signal line crosses.

FAQ

How do I use the baseline effectively?

The baseline acts as a filter. If the BBW is below the baseline, it typically indicates a "quiet" market where trades may lack follow-through. When BBW crosses above the baseline, it suggests a volatility breakout is occurring.

What is the difference between the Signal Line and the Baseline?

The Baseline represents a long-term volatility average or "floor," whereas the Signal Line is a shorter-term moving average of the BBW itself, used to detect immediate momentum shifts.

How can I access Bollinger Bands Width?

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