Bollinger's Difference (BoDi) Indicator

Related: candle difference - another powerful indicator for MetaTrader 4 traders.

The Bollinger's Difference (BoDi) indicator is derived from the well-known Bollinger Bands. Bollinger Bands consist of two lines placed above and below a moving average, plotted at a specific number of standard deviations from it. During high volatility, the lines expand, and during low volatility, they contract, indicating potential price movement boundaries.

Also recommended: cauchy difference - similar indicator with strong performance on MetaTrader 4.

An interesting observation is that the widening of the Bollinger Bands channel often coincides with the formation of bullish or bearish price movements. While it's challenging to pinpoint the exact starting point of these movements, the narrowing of the channel can signal the end of an impulse.

Figure 1 illustrates the correlation between the narrowing of the Bollinger Bands channel and the shift in market dynamics. The indicator calculates the difference between the upper and lower Bollinger Bands, presenting it as a histogram below the chart.

The indicator is computed using the following formulas:

1. Bollinger Bands:
where:

- d is the number of standard deviations

- y is the price for bar i

- n is the number of periods for calculations

- upperbb and lowebb are the upper and lower Bollinger Bands

2. BoDi:
where:

- 1000 is a coefficient for improved visualization

Figure 1 demonstrates that rapid price movements result in wider Bollinger Bands and a green BoDi histogram. Conversely, slower price movements cause the bands to narrow, and the BoDi histogram turns red, indicating potential exit points for traders.

Figure 2 showcases examples of identifying exit points using the BoDi indicator. For expert advisors, an algorithm is proposed to determine the closing point:
where:

- [1] is the index of the bar relative to the current (zero) bar

- n is the number of the last bar used in the calculation

- k is the ratio of the second bar [2] to the last bar [n]

It is recommended to calculate BoDi using the Exponential Moving Average (EMA) with a period of 20 and the typical price.

You may also like: i close difference v-08 - excellent alternative for indicator users on MetaTrader 4.

#property copyright "robotfx"
#property link "https://robotfx.org"
#property indicator_separate_window
#property indicator_buffers 3
#property indicator_color1  black
#property indicator_color2  red
#property indicator_color3  green
extern int    bodiperiod=20;
extern int    bodishift=0;
extern int    bodima_mode=0;

.......

• 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.