Indicator derived from Bollinger Bands

Bollinger Bands
Avoiding Multiple Counting
Indicator derived from Bollinger Bands that I call% b can be of great help, using the same formula that George Lane used for stochastics. The indicator% b tells us where we are within the bands. Unlike stochastics, which is bounded by 0 and 100% b can assume negative values ​​and values ​​above 100 when prices are out of bands. In 100 we are in the upper range of 0 are at the lower band. Over 100 we are above the upper bands and below 0 we are below the lower band. Figure 7 for the exact formula.

Indicator% b lets us compare price action to indicator action. The pressure down, I guess we get to -20% for B and 35 for relative strength index (RSI). The next council on a slightly lower price levels (after the rally),% b only falls to 10, while RSI stops at 40. We get a buy signal triggered by the price action within the bands. (The first low came outside of the bands, while the second low was made inside the bands.) The buy signal is confirmed by RSI, as it not make a new low, giving us a confirmed buy signal.
Trading bands and indicators are good tools, but when they are combined, the resultant access to markets becomes powerful. Band width, another indicator derived from Bollinger Bands, may also interest traders. It is the width of the bands expressed as a percentage of the average range. When the bands narrow drastically, a sharp expansion in volatility usually occurs in the very near future. For example, a drop in band width below 2% for the Standard & Poor's 500 has led to spectacular moves. The market usually starts in the wrong direction after the bands tighten before really getting underway in January 1991 which is a good example (Fig. 9).