Bollinger Bands %D

The Madrid Bollinger Bands %D indicator is a trend and momentum oscillator that measures the price's relative position within a set of Bollinger Bands to identify overbought/oversold conditions and trend strength. By converting the standard Bollinger Bands into a percentage-based oscillator, it allows traders to easily visualize where price sits in relation to historical volatility.

Usage

The Usage of the Madrid Bollinger Bands %D revolves around its zero to 100 scale. When the indicator value exceeds 100, the price has moved above the upper Bollinger Band, signaling an overbought condition or a very strong bullish expansion. Conversely, a reading below 0 indicates the price is below the lower band, signaling an oversold condition or strong bearish expansion.

The midline (50%) represents the Bollinger Band Basis (the SMA). Values sustained above 50 suggest a bullish trend, while values below 50 suggest a bearish trend. The distance from the 50 line indicates the intensity of the current move.

Details

This tool calculates the position of the source price relative to the lower and upper bands using the formula: (Source - Lower Band) / (Upper Band - Lower Band) * 100.

• Trend Strength: The further the oscillator moves away from the 50 midline, the stronger the current momentum.
• Smoothing: The script includes an optional smoothing feature that applies a 3-period Simple Moving Average (SMA) to the raw %D values to reduce market noise and provide cleaner signals.

Settings

• Source: Determines the price data used for the calculation (typically the Close price).
• Length: Sets the lookback period for the moving average and standard deviation calculations.
• Multiplier: Adjusts the width of the underlying Bollinger Bands (standard is 2.0).
• Smooth: A toggle to enable or disable a 3-period SMA smoothing on the final output.

FAQ

How do I interpret values over 100?

Values over 100 mean the price is currently trading outside the upper Bollinger Band, which is often a sign of extreme momentum or a potential reversal point if price begins to move back inside the bands.

What does the 50 level signify?

The 50 level corresponds to the Basis line (SMA) of the Bollinger Bands. Crossing above 50 indicates the price is in the upper half of the bands, while crossing below indicates it is in the lower half.

Where can I access the Madrid Bollinger Bands %D?

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