Double Bollinger Bands + DEMA

The Double Bollinger Bands + DEMA indicator combines two sets of Bollinger Bands with a Double Exponential Moving Average (DEMA) to provide traders with a comprehensive view of volatility, trend direction, and potential reversal points. By utilizing two distinct standard deviation bands alongside a fast-reacting DEMA, the tool aims to highlight momentum shifts and overextended price action within a single overlay.

Usage

The indicator can be used to identify trend exhaustion and entry points based on the interaction between the price, the DEMA, and the two sets of Bollinger Bands.

• Trend Identification: The DEMA serves as a primary trend filter; when price and DEMA are above the basis lines, the trend is considered bullish.
• Mean Reversion: Traders can look for price interactions with the outer bands (BB2) for potential mean reversion trades, especially when the DEMA begins to curl back toward the basis.
• Crossover Signals: The indicator automatically plots bullish and bearish arrows when the DEMA crosses the secondary Bollinger Band basis (BB2 Basis). A cross above signals upward momentum, while a cross below suggests downward pressure.

Details

The script calculates two independent Bollinger Band sets. Typically, one set is configured with a lower standard deviation (e.g., 2.0) to capture normal price fluctuations, while the second set uses a higher deviation (e.g., 3.0) to identify extreme volatility.

The DEMA (Double Exponential Moving Average) is included to reduce the lag found in traditional moving averages. It is calculated using the formula: DEMA = 2 * EMA - EMA(EMA). This faster response time allows the crossover signals against the BB Basis to trigger earlier than standard SMA or EMA crosses.

Settings

• BB1 Length: The lookback period for the first set of Bollinger Bands.
• BB1 StDev: The standard deviation multiplier for the first set of bands.
• BB1 Source: The price source used for the first BB calculation.
• BB2 Length: The lookback period for the second set of Bollinger Bands.
• BB2 StDev: The standard deviation multiplier for the second set of bands (usually set wider than BB1).
• BB2 Source: The price source used for the second BB calculation.
• DEMA Length: The lookback period for the Double Exponential Moving Average.
• DEMA Source: The price source used for the DEMA calculation.

FAQ

How do I interpret the arrows on the chart?

The arrows represent crossovers between the DEMA and the BB2 Basis line. A green "Bullish" arrow appears when the DEMA crosses above the basis, and a red "Bearish" arrow appears when it crosses below.

Can I change the volatility sensitivity?

Yes, by adjusting the "BB1 StDev" and "BB2 StDev" settings, you can expand or contract the bands to better fit the volatility of the specific asset or timeframe you are trading.

How do I access Double Bollinger Bands + DEMA?

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