Bollinger Bands 3

The Bollinger Bands 3 indicator provides a comprehensive visualization of volatility and price levels by plotting three distinct sets of Bollinger Bands simultaneously based on a single moving average basis.

Usage

The Bollinger Bands 3 tool is used to identify potential overbought or oversold conditions, volatility clusters, and trend strength across multiple standard deviation levels. By displaying three bands (typically set at 1, 2, and 3 standard deviations), traders can visualize "zones" of price action.

• Trend Identification: Price hugging the outer bands (BB3) often indicates a strong trend, while price oscillating between the inner bands (BB1) suggests a period of consolidation.
• Volatility Analysis: The expansion and contraction of the bands provide immediate feedback on market volatility.
• Reversal Points: The outer bands (BB3) can act as dynamic support or resistance where price exhaustion may occur.

Details

The indicator calculates a central Simple Moving Average (SMA) and the standard deviation of the source price over a user-defined length. It then projects three sets of upper and lower bands by multiplying the standard deviation by three different factors. This approach ensures all bands are anchored to the same mean, providing a consistent view of price distribution relative to the average.

Settings

• BB length: The lookback period used for the Simple Moving Average and standard deviation calculations.
• BB source: The price data point used for calculations (e.g., Close, Open, HL2).
• BB1/2/3 mult: The standard deviation multiplier for the first, second, and third sets of bands respectively.
• BB1/2/3 Show/Hide: Toggles the visibility of each specific band set and its corresponding background fill.

FAQ

How do I interpret price moving outside the third band?

Price moving outside the third standard deviation band is statistically rare and often indicates an extreme volatility event or a very strong momentum push that may eventually lead to a mean reversion.

Can I change the colors of the bands?

Yes, you can modify the visual appearance, including colors and line styles, through the "Style" tab in the indicator settings menu.

How can I access Bollinger Bands 3?

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