Bollinger Trend
Definition BBTrend (Bollinger Bands Trend) is a technical analysis indicator designed to assess market trend strength by analyzing the volatility differences between Bollinger Bands of different periods. It is based on Bollinger Bands, a volatility indicator developed by John Bollinger, which shows the price range of the market through upper and lower bands.
Components and Calculation The calculation of the BBTrend indicator involves two instances of Bollinger Bands: a short-period Bollinger Band and a long-period Bollinger Band. The calculation formula is as follows: [ \text{BBTrend} = \frac{|\text{shortLower} - \text{longLower}| - |\text{shortUpper} - \text{longUpper}|}{\text{shortMiddle}} \times 100 ]
Where:
shortLower: Lower band of the short-period Bollinger Band
longLower: Lower band of the long-period Bollinger Band
shortUpper: Upper band of the short-period Bollinger Band
longUpper: Upper band of the long-period Bollinger Band
shortMiddle: Middle band of the short-period Bollinger Band (typically a moving average)
By calculating the differences between the short and long-period Bollinger Bands, the BBTrend indicator quantifies the strength of the market trend.
How to Use Bollinger Trend
Assessing Market Trend: By observing changes in the BBTrend indicator value, traders can identify the direction of the market trend.
A positive BBTrend value indicates an uptrend;
A negative BBTrend value indicates a downtrend.
Entry and Exit Signals:
Go long when BBTrend turns from negative to positive.
Go short when BBTrend turns from positive to negative.
Advantages and Disadvantages of Bollinger Trend
Advantages
Accurate Trend Assessment: The BBTrend indicator can more accurately determine the market trend direction by combining data from different period Bollinger Bands.
Wide Applicability: Suitable for various markets and time frames.
Simple and User-Friendly: The calculation formula is straightforward and easy to understand and use.
Disadvantages
Lagging Nature: Since the BBTrend indicator is based on Bollinger Bands, it may exhibit some lag and not promptly reflect rapid market changes.
Noise Impact: In choppy markets, the BBTrend indicator may generate many false signals, affecting the accuracy of trading decisions.
Need for Combination with Other Indicators: Using the BBTrend indicator alone may not be sufficient for comprehensive trading decisions; it is recommended to combine it with other technical indicators like RSI and MACD for a thorough analysis.
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