Adaptive Bollinger Bands is an advanced Bollinger Bands technical indicator for MT4 Forex trading. Adaptive Bollinger Bands can change the look back period dynamically based on current Forex market condition. Adaptive Moving Average with Bollinger Bands ® – indicator for MetaTrader 5 is a Metatrader 5 (MT5) indicator and the essence of the forex indicator is to transform the accumulated history data. Adaptive Moving Average with Bollinger Bands ® – indicator for MetaTrader 5 provides for an opportunity to detect various peculiarities and.
Today the most popular approaches to trading bands are Donchian, Keltner, Percentage and, of course, Bollinger Bands. Percentage bands are fixed, they do not adapt to changing market conditions; Donchian bands use recent highs and lows and Keltner bands use Average True Range as adaptive mechanisms.
Bollinger Bands use standard deviation to adapt to changing market conditions and thereby hangs a tale. When I became active in the markets on a full time basis in I was mainly interested in options and technical analysis. Information on both was hard to obtain in those days but I persisted; with the help of an early microcomputer I was able to make some progress.
A touch of the upper band by price that was not confirmed by strength in the oscillator was a sell setup and a similarly unconfirmed tag of the lower band was a buy setup.
The problem with that approach was that percentage bands needed to be adjusted over time to keep them germane to the price structure and the adjustment process let emotions into the analytical process.
If you were bullish, you had a natural tendency to draw the bands so they presented a bullish picture, if you were bearish the natural result was a picture with a bearish bias. This was clearly a problem. We tried reset rules like lookbacks with some success, but what we really needed was an adaptive mechanism. I was trading options at the time and had built some volatility models in an early spreadsheet program called SuperCalc.
One day I copied a volatility formula down a column of data and noticed that volatility was changing over time. Seeing that, I wondered if volatility couldn't be used to set the width of trading bands. That idea may seem obvious now, but at the time it was a leap of faith. At that time volatility was thought to be a static quantity, a property of a security, and that if it changed at all, it did so only in a very long-term sense, over the life of a company for example.
Today we know the volatility is a dynamic quantity, indeed very dynamic. After some experimentation I settled on the formulation we know today, an n period moving average with bands drawn above and below at intervals determined by a multiple of standard deviation We use the population calculation for standard deviation. The defaults today are the same as they were 35 years ago, 20 periods for the moving average with the bands set at plus and minus two standard deviations of the same data used for the average.
I had presented a chart showing an unconfirmed tag of my upper band and explained that the first down day would generate a sell signal. Bill then asked me what I called those lines around the price structure, a question that I was totally unprepared for, so I blurted out the alliteratively obvious choice: They are curves drawn in and around the price structure usually consisting of a moving average the middle band , an upper band, and a lower band that answer the question as to whether prices are high or low on a relative basis.
Bollinger Bands work best when the middle band is chosen to reflect the intermediate-term trend, so that trend information is combined with relative price level data. For many years that was the state of the art: Here are a couple of practical examples of the usage of Bollinger Bands and the classic Bollinger Band tools along with a volume indicator, Intraday Intensity:. Click chart to enlarge. On 20 July prices tagged the upper Bollinger Band while day Intraday Intensity was deep in negative territory setting up a sell alert.
The first down day was the sell signal and entry. Automatically determines the best period of Bollinger Bands to adapt to the current market conditions. Works with 4 and 5 digits brokers. How is the look back period determined There are six adaptive methods in Adaptive Bollinger Bands, all works in the similar way. In ranging, sideways, swing, choppy, and oscillating market, the look back period tends to be shorter.
In trending market, the period tends to be longer. The stronger trend, the longer period. The weaker trend, the shorter period. With this mechanism, in trending market, Adaptive Bollinger Bands is less likely to change its direction so we can ride on the trend for longer time. And in ranging market, Adaptive Bollinger Bands will change its direction more often so that we can either catch the upcoming trend early or catch each reversals in the market.
Download and use it now: Adaptive Bollinger Bands indicator MT4. Adaptive CCI can change the look back period dynamically based on current Forex market condition. Adaptive CCI adapts to the Forex market changes as much as Adaptive RSI can change the look back period dynamically based on current Forex market condition.
Adaptive RSI adapts to the Forex market changes as much as Adaptive Moving Average can change the look back period dynamically based on current Forex market condition.
Adaptive Moving Average adapts to the Forex market changes as
The weaker trend, the shorter period.
Freeware 20 Jul 1.