BBW: Bollinger Bands Width Indicator
Bollinger Bands Width (BBW) is a technical indicator that measures the width of Bollinger Bands. Bollinger Bands are a tool used by traders to identify possible areas of support and resistance. The width of the bands is directly related to the volatility of the underlying security.
The BBW indicator can be used to measure market conditions and make trading decisions accordingly. When markets are volatile, the bands will widen, and when markets are calm, the bands will narrow. A trader might use this information to decide when to enter or exit a trade.
The BBW indicator is not widely used by traders, but it can be a helpful tool for those who are familiar with Bollinger Bands and how to interpret them.
In this blog article, we will take a look at the Bollinger Bands Width (BBW) indicator and how it can be used in your trading.
What is a Bollinger Bands Width Indicator?
A Bollinger Bands Width indicator is a technical analysis tool that measures the percentage difference between the upper and lower Bollinger Bands.
The width of the Bollinger Bands can be measured using the Bollinger Bands Width Indicator. The BBW measures the distance between the upper and lower Bollinger Bands as a percentage of the central SMA.
When the BBW is close to 100%, it means that the Bollinger Bands are wide apart and there is high volatility in the market. When the BBW is close to 0%, it means that the Bollinger Bands are close together and there is low volatility in the market.
How to use Bollinger Bands Width indicator?
Bollinger Bands Width (BBW) is a technical indicator that measures the distance between Bollinger Bands.
The Bollinger Bands Width indicator is calculated using the following formula:
BBW = (Upper Bollinger Band — Lower Bollinger Band) / middle Bollinger Band
The BBW indicator can be used to identify periods of market expansion and contraction. A reading below 0.5 indicates market contraction, while a reading above 1.0 indicates market expansion.
The Bollinger Bands Width indicator can be used as a standalone tool or in conjunction with other technical indicators to generate trading signals.
Support and Resistance Levels for Bollinger Bands Width Indicator
Bollinger Bands Width (BBW) Indicator is a popular technical indicator that measures the width of Bollinger Bands. BBW indicator can be used to identify market conditions, as well as potential support and resistance levels.
When the market is in a range-bound state, the Bollinger Bands will be relatively tight. This signals that the market is consolidating and there is not much price movement.
As prices break out of the range, the Bollinger Bands will widen, signaling that there is more price movement and volatility.
The BBW indicator can also be used to identify potential support and resistance levels. When prices are trending higher, potential support levels can be found at previous highs. Likewise, when prices are trending lower, potential resistance levels can be found at previous lows.
The Bollinger Bands Width indicator can be a helpful tool for traders who are looking to trade breakouts or identify potential support and resistance levels.
How to create a trading strategy with a Bollinger Bands Width Indicator
Bollinger Bands Width (BBW) is a technical indicator that measures the distance between Bollinger Bands.
Bollinger Bands are volatility bands placed above and below a moving average. They expand and contract as price fluctuates and can be used to identify trends and predict future price movements.
The BBW Indicator can be used to create trading strategies, as it can give traders an idea of when markets are overbought or oversold.
When the distance between the Bollinger Bands narrows, it indicates that prices are consolidating and may be about to break out in either direction.
Bollinger Bands Width Indicator at Traderlands Strategy Creator Tool
You can start creating a strategy by selecting the “Bollinger Bands Width (BBW)” indicator from the list. An example strategy is shown in the image below. You can use the Bollinger Bands Width indicator to create a strategy after doing your own research.
Enter Algorithm Rules You Can Add To Strategy Creator
Exit Algorithm Rules You Can Add To Strategy Creator
WARNING: The entry and exit strategies in the images are prepared ONLY for educational purposes to explain how indicators work. It does not guarantee any profit.
When creating an algorithmic trading strategy, a rule set is usually created by using more than one indicator.
Other Indicators can be used with the Bollinger Bands Width Indicator
There are a few other indicators that can be used in conjunction with the Bollinger Bands Width indicator to get a better sense of market conditions.
The Relative Strength Index (RSI) is a good indicator to use to measure when markets are overbought or oversold. A reading above 70 is considered overbought, and below 30 is considered oversold.
The Moving Average Convergence Divergence (MACD) histogram can also be used to help identify market turning points. When the MACD line crosses above the signal line, it is generally considered a bullish signal, and when it crosses below the signal line, it is generally considered a bearish signal.