Bollinger Bands Oscillator

Bollinger Bands Oscillator BBO

John Bollinger developed - based on his famous bands and construction of the stochastic formula for Lane - an oscillator, which is the situation of course reflects values ​​within or outside the bands. Bollinger linked here has its own approach to the inclusion of stochastic volatility with the concept. The oscillator, often referred to as% B has, in appearance as well as certain similarities with the Slow Stochastics.

Even when Bollinger Bands Oscillator (BBO), first the usual calculation steps are part of the Bollinger bands. For this purpose (in the original approach), a simple moving average constructed, which serves as Mittlellinie, around it is an upper and lower band of adding or subtracting twice the standard deviation defined. A modification of the original approach can be achieved through the use of exponential or weighted average or weighted price developments as well as typical variations. Also, the period setting and related to the multiplication factor for the standard deviation are customizable.


% B is calculated by applying the Stochastics formula, the difference between closing price and the lower band is divided by 100 multiplied by the difference between the upper band and lower band. The result is an oscillator that (the current closing price is within the bands) in most cases is 0-100. The value 100 indicates - how can easily understand - the opening through the upper band, the value 0 represents the average of the lower bands. Values ​​above 100 or below 0 indicate that the market value of the belt system is broken.

For the interpretation is going on at first said that the indicator provides quite good and many signals, but sometimes too early. The most important application is the detection of extreme situations where the likelihood of an imminent price correction is very high. The points of intersection in the extreme zone area (indicator values ​​0 and 100) can be used as a concrete trading signals. Furthermore, a change in direction can be interpreted as an indication of BBO to changes in price momentum. Trading signals can be generated by a signal line is constructed and used the intersection points of the indicator with its signal line as long (cut up) or sell signal (cut down). A signal filtering is possible by the area above the center line only buy signals are traded in the area below the center line only sell signals.