Bollinger Bands %RSI

The Bollinger Bands %RSI indicator is a momentum oscillator that combines the Relative Strength Index (RSI) with Bollinger Band calculations to measure where the current RSI value sits relative to its historical volatility. This tool helps traders identify potential overbought and oversold conditions by normalizing the RSI within dynamic volatility bands.

Usage

The Bollinger Bands %RSI (BBR) oscillates around a range where 1 represents the upper Bollinger Band and 0 represents the lower Bollinger Band.

• Overbought Conditions: When the BBR value rises above 1, it indicates that the RSI has exceeded its upper Bollinger Band. This is often highlighted by a red background, suggesting the asset may be overextended to the upside.
• Oversold Conditions: When the BBR value falls below 0, it indicates that the RSI has dropped below its lower Bollinger Band. This is often highlighted by a green background, suggesting the asset may be overextended to the downside.
• Mean Reversion: Traders often look for the BBR to return toward the 0.5 level (representing the basis or SMA) as a sign of price stabilization.

Details

The script calculates the RSI based on the HLC3 (High, Low, Close average) source. It then applies standard Bollinger Band logic to this RSI line rather than the price action itself.

1. RSI Calculation: A standard RSI is calculated using the user-defined length.
2. Band Calculation: A Simple Moving Average (SMA) of the RSI serves as the "basis." The upper and lower bands are then projected using a multiple of the standard deviation of that RSI.
3. Percent Calculation: The final output is derived using the formula: (RSI - Lower Band) / (Upper Band - Lower Band). This converts the RSI's position into a percentage format relative to the bands.

Settings

• Length: Determines the lookback period for both the RSI calculation and the moving average/standard deviation of the Bollinger Bands.
• Multiplier: Sets the number of standard deviations used to calculate the width of the Bollinger Bands.
• Highlight Oversold/Overbought?: A toggle to enable or disable the background color highlights when the RSI breaches the bands.

FAQ

How do I interpret a BBR value above 1?

A value above 1 means the RSI is currently higher than the upper Bollinger Band, which is traditionally viewed as an overbought signal.

Can I change the source price used for the RSI?

In this version, the script uses the HLC3 (Average Price) as the source for the RSI calculation to provide a more comprehensive view of the bar's range.

How can I access Bollinger Bands %RSI?

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