Charts
Bollinger Bandwidth
The Bollinger Bandwidth indicator identifioes situations where the direction of an instrument's prices are about to move. Bollinger Bands form an envelope drawn a number of standard deviations above and below a moving average. Bandwidth measures the percentage difference between the upper and lower bands, giving an indication to its volatility.
Configuration Options
- Field: Price or combination of prices to use as the base for average calculations. Possible values include:
- Open
- High
- Low
- Close
- Adjusted Close
- HL/2 \( \left ( \frac{High + Low}{2} \right ) \)
- HLC/3 \( \left ( \frac{High + Low + Close}{3} \right ) \)
- HLCC/4 \( \left ( \frac{High + Low + Close + Close}{4} \right ) \)
- OHLC/4 \( \left ( \frac{Open + High + Low + Close}{4} \right ) \)
- Period: Number of bars to use in the calculations.
- Standard Deviations: Number of standard deviations above and below the average to draw the bands.
- Moving Average Type: Type of moving average to use in the calculations:
- Simple: Mean (average) of the data.
- Exponential: Newer data are weighted more heavily geometrically.
- Time Series: Calculates a linear regression trendline using the “least squares fit” method.
- Triangular: Weighted average where the middle data are given the most weight, decreasing linearly to the end points.
- Variable: An exponential moving average with a volatility index factored into the smoothing formula. The Variable Moving average uses the Chande Momentum Oscillator as the volatility index.
- VIDYA: An exponential moving average with a volatility index factored into the smoothing formula. The VIDYA moving average uses the Standard Deviation as the volatility index. (Volatility Index DYnamic Average).
- Weighted: Newer data are weighted more heavily arithmetically.
- Welles Winder:The standard exponential moving average formula converts the time period to a fraction using the formula EMA% = 2/(n + 1) where n is the number of days. For example, the EMA% for 14 days is 2/(14 days +1) = 13.3%. Wilder, however, uses an EMA% of 1/14 (1/n) which equals 7.1%. This equates to a 27-day exponential moving average using the standard formula.
- Hull: The Hull Moving Average makes a moving average more responsive while maintaining a curve smoothness. The formula for calculating this average is as follows: HMA[i] = MA( (2*MA(input, period/2) – MA(input, period)), SQRT(period)) where MA is a moving average and SQRT is square root.
- Double Exponential: The Double Exponential moving average attempts to remove the inherent lag associated to Moving Averages by placing more weight on recent values.
- Triple Exponential: TBD
- Simple
- Exponential
- Time Series
- Triangular
- Variable
- VIDYA
- Weighted
- Welles Winder
- Hull
- Double Exponential
- Triple Exponential
- Color Selectors: Colors to use for graph elements.
- Display Axis Label: Whether to display the most recent value on the Y axis.
Typically, bandwidth parameters will match the user’s preferred Bollinger Band parameters.
Formula
Bollinger Bandwidth = (Upper Band – Lower Band) / Central Moving Average * 100
\[Bollinger\;Bandwidth = \frac{(Upper\;Band - Lower\;Band)}{Central\;Moving\;Average} \times 100 \]