Bollinger bands + EMA

The Bollinger bands + EMA indicator identifies potential mean-reversion opportunities by detecting price "pokes" outside of Bollinger Bands and signaling a reversal when the price returns within the bands, using an EMA as a primary target.

Usage

The indicator is designed to spot short-term reversals, particularly on lower timeframes such as the 1-minute or 5-minute charts.

• Long Signals (Up Triangle): Occur when the previous candle's close was below the lower Bollinger Band, but the current candle high is back above it. This suggests a potential recovery.
• Short Signals (Down Triangle): Occur when the previous candle's close was above the upper Bollinger Band, but the current candle low is back below it. This suggests a potential pullback.
• Take Profit: The Exponential Moving Average (EMA) plotted on the chart serves as a logical target for take-profit levels, representing a return to a short-term mean.

This tool is most effective when used as a confirmation signal alongside other technical or fundamental analysis tools rather than as a standalone system.

Details

The script combines two classic volatility and trend tools: Bollinger Bands and an Exponential Moving Average. The core logic relies on the exhaustion of price movement outside of standard deviation bands. When price closes outside a band, it indicates an overextended state. The script triggers a signal only when price action confirms a return toward the mean (the basis/EMA).

Settings

• BB Length: The lookback period for calculating the Bollinger Bands basis (SMA) and Standard Deviation.
• Source: The price data used for the calculations (default is Close).
• StdDev: The multiplier for the Standard Deviation, which determines the width of the bands.
• Offset: Shifts the visual plot of the EMA and bands forward or backward.
• EMA Length: The lookback period for the Exponential Moving Average used as the target level.

FAQ

How do I use the signals?

Signals are displayed as small triangles. An upward green triangle suggests a potential long entry, while a downward red triangle suggests a potential short entry, typically targeting the blue EMA line.

What timeframes work best?

While applicable to any timeframe, the strategy is optimized for smaller timeframes like the 1m and 5m for capturing quick mean-reversion scalps.

How can I access Bollinger bands + EMA?

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