One of the biggest problems with the Bollinger Band indicator is that it is slow to respond to rapid changes in the market. Once there has been a spike in the market, the bands severely widen often too much to be useful to any trader, and take a long time to come back together to a meaningful level.
Now with the ResettingBB indicator, once the price reaches a particular standard deviation level, the indicator resets its calculation accordingly.
So now you can easily have a 2.0 standard deviation band that will reset whenever the price reaches something more extreme like 3.0 standard deviations.
- Periods – The number of periods to calculate the standard deviation. Note the actual number of periods will be less than this if the last reset was within this range. Default is 20.
- Deviations – The number of standard deviations to draw the bands at. Default is 2.0
- Reset Threshold – The number of standard deviations, which if reached, causes the indicator to reset its standard deviation calculation. Default is 3.0
- Threshold Calculation – If Fixed, the standard deviation calculation that is used to determine a reset uses a fixed number of periods. If Reset, this calculation resets with each reset. Default is Reset.
- Min. Band Width – When the BB resets, the bands are together. If this is undesirable, a minimum width can be entered here. Default is 0.0
- Hide Average – If yes, the moving average will be hidden. If no, the moving average will be displayed. Default is yes.
- Can be used in reversion strategies with possibly better results than the original Bollinger Band implementation.
- Can be used as a volatility indicator by examining the distance between the bands, with less lag than the original Bollinger Band implementation.
This indicator was developed exclusively by MooMooForex. Additional reading may be found inside the Research blog.