Bollinger Bands (BB)

Related: B Bands Psar Indicator - another powerful indicator for MetaTrader 4 traders.

The Bollinger Bands ® (BB) are similar to envelopes. The only difference is that the bands of envelopes are plotted a fixed distance (%) away from the moving average, while the Bollinger Bands are plotted a certain number of standard deviations away from it.

Also recommended: keltner at r bands - similar indicator with strong performance on MetaTrader 4.

Standard deviation is a measure of volatility, therefore Bollinger Bands adjust themselves to market conditions. When markets become more volatile, the bands widen, and they contract during less volatile periods.

Bollinger Bands are usually drawn on the price chart but can also be added to the indicator chart. Just like envelopes, the interpretation of Bollinger Bands is based on the tendency of prices to remain between the top and bottom lines. A distinctive feature of the Bollinger Band indicator is its variable width due to price volatility. In periods of significant price changes (high volatility), the bands widen, allowing prices to move freely. During standstill periods or low volatility, the band contracts, keeping prices within its limits.

The following traits are particular to the Bollinger Band:

- Abrupt price changes tend to occur after the band has contracted due to decreased volatility.

- If prices break through the upper band, a continuation of the current trend is expected.

- If the pikes and hollows outside the band are followed by pikes and hollows inside, a trend reversal may occur.

- Price movements starting from one band line often reach the opposite line, which is useful for forecasting price guideposts.

Calculation

Bollinger Bands are formed by three lines. The middle line (ML) is a simple moving average. ML = SUM (CLOSE, N) / N = SMA (CLOSE, N)

The top line (TL) is the middle line plus a certain number of standard deviations (D). TL = ML + (D * STDDEV)

The bottom line (BL) is the middle line minus the same number of standard deviations. BL = ML - (D * STDDEV)

STDDEV = SQRT (SUM ((CLOSE - SMA (CLOSE, N))^2, N) / N)

Where:

- SUM (..., N) - Sum for N periods

- CLOSE - Close price

- N - Number of periods used in calculation

- SMA - Simple Moving Average

- SQRT - Square root

- STDDEV - Standard deviation

It is recommended to use a 20-period simple moving average as the middle line and plot the top and bottom lines two standard deviations away. Additionally, moving averages of less than 10 periods are less effective.

Technical Indicator Description

The full description of Bollinger Bands is available in the relevant section.

You may also like: bbands stop indicator - excellent alternative for indicator users on MetaTrader 4.

#property copyright "robotfx"
#property link "https://robotfx.org"
#property description "this code is educational. feel free to use, modify and upgrade as you wish. visit robotfx.org for professional trading tools"
#property strict
#include <movingaverages.mqh>
#property indicator_chart_window
#property indicator_buffers 3
#property indicator_color1 lightseagreen
#property indicator_color2 lightseagreen
#property indicator_color3 lightseagreen

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• This tool is provided for educational and testing purposes only.
• Past performance does not guarantee future results.
• Trading involves substantial risk of loss. Use on a demo account first.
• Results may vary depending on market conditions, broker, and settings.
• We recommend thorough backtesting and forward testing before using with real funds.