Bollinger Bands

1. Squeeze Signals (Volatility Contraction)

Bullish Squeeze Signal

Visual Identification: A green arrow appears below the candle generating the signal.

Suggestion: New long positions; exit remaining short positions.

  1. The bands become narrow and close, implying low volatility.
  2. The bands lose their slope and become flat, forming a consolidation move.
  3. A bullish candle closes above the upper Bollinger band.
  • Entry: Activated above the high of the signal candle.
  • Stop Loss: Placed below the bottom of the consolidation area.

Bearish Squeeze Signal

Visual Identification: A red arrow appears above the candle generating the signal.

Suggestion: New short positions; exit remaining long positions.

  1. The bands become narrow and close, implying low volatility.
  2. The bands lose their slope and become flat, forming a consolidation move.
  3. A bearish candle closes below the lower Bollinger band.
  • Entry: Activated below the low of the signal candle.
  • Stop Loss: Placed above the top of the consolidation area.

Neutral Squeeze Signal

Suggestion: Possible breakout from sideways consolidation (can be bullish or bearish).

Identification: A target icon outlines the signal along with a description in the monitor panel.

2. Reversal Signals

Bullish Reversal Signal

  1. A bottom forms with a close below the lower Bollinger band.
  2. There is a bounce towards the middle band.
  3. A new bottom is formed with a close above the lower band.
  • Entry: Activated above the last top.
  • Stop Loss: Placed below the last bottom.

Bearish Reversal Signal

  1. A top is formed with a close above the upper Bollinger band.
  2. There is a drop towards the middle band.
  3. A new top is formed with a close below the upper band.
  • Entry: Activated below the last bottom.
  • Stop Loss: Placed above the last top.

3. Alignment Signals (Trend Continuation)

Bullish Alignment Signal

Visual Identification: A green arrow appears below the candle generating the signal.

Suggestion: New long positions; exit remaining short positions. The market continues higher until an exit signal.

  1. Strong bullish move with successive closes along the upper Bollinger band ("walking the bands").
  2. A decline followed by a close below the middle band.
  3. A bullish candle closes above the middle band.
  • Entry: Activated above the high of the signal candle.
  • Stop Loss: Placed below the recent low.

Bearish Alignment Signal

Visual Identification: A red arrow appears above the candle generating the signal.

Suggestion: New short positions; exit remaining long positions. The market continues lower until an exit signal.

  1. Strong bearish move with successive closes along the lower Bollinger band ("walking the bands").
  2. A rally followed by a close above the middle band.
  3. A bearish candle closes below the middle band.
  • Entry: Activated below the low of the signal candle.
  • Stop Loss: Placed above the recent high.

4. Exit Signals

Bullish Exit Signal

Visual Identification: A downwards gray arrow.

Suggestion: Exit any remaining long positions.

  1. Strong bullish move with successive closes along the upper Bollinger band.
  2. A decline followed by a close below the middle band.
  • Exit: Activated below the low of the signal candle.

Bearish Exit Signal

Visual Identification: An upwards gray arrow.

Suggestion: Exit any remaining short positions.

  1. Strong bearish move with successive closes along the lower Bollinger band.
  2. A bounce followed by a close above the middle band.
  • Exit: Activated above the high of the signal candle.

Monitor Panel and Indicator Settings

Monitor Panel

  • The panel outlines all active signals across the enabled time frames.
  • Time frames can be activated or deactivated from the top of the monitor panel.
  • Clicking the envelope icon next to any signal switches the chart to the signal's time frame and provides further information.

Accessing Indicator Settings

To access the indicator settings:

  1. Right-click on the chart and select "Indicator list."
  2. Select the "Avermis Bollinger Bands" indicator.
  3. Click on "Properties."

Input Parameters (Inputs Tab)

The following parameters can be adjusted:

  • Language: Can be changed via the drop-down menu.
  • Scanner Mode: Must be enabled (advanced version feature). When enabled, the indicator scans all securities in the Market Watch window for active signals across enabled time frames.
  • Time Frames: The six time frames displayed in the Monitor panel can be customized using the drop-down menus.
  • Monitor Panel Dimensions: Height, width, and column width can be adjusted.
  • Indicator Depth: Refers to the number of candles the indicator appears on (e.g., 300 makes bands visible across the last 300 candles).
  • Signal Duration: How many candles the signal arrow remains visible after generation (e.g., input of 2 means the arrow is removed after two candles).
  • Band Appearance: Color and width of the band lines can be adjusted.
  • Bollinger Band Parameters: Adjustments include the periods used, the shift, and the standard deviations for calculation.

Note: Closing the settings window will reload the monitor panel with the enabled scanner (if activated).

Detailed Summary

This text outlines various trading signals and mechanics associated with Bollinger Bands, categorizing them into four types: Squeeze Signals (volatility contraction), Reversal Signals, Alignment Signals (trend continuation), and Exit Signals. Each signal type—bullish, bearish, or neutral—is defined by specific visual cues, market conditions (e.g., bands narrowing, price closing outside the bands), suggested trading actions (entry/exit/stop loss placement), and continuation/exit conditions. The document also describes the functionality of a Monitor Panel, which tracks active signals across multiple time frames, and details the extensive customization options available in the indicator's settings, covering language, scanner mode activation, time frame configuration, display dimensions, and Bollinger Band calculation parameters.

Key Takeaways

  • Bollinger Band signals are categorized into Squeeze, Reversal, Alignment (Trend Continuation), and Exit types.
  • Squeeze Signals occur when volatility is low (bands narrow and flatten), predicting a breakout:
    • Bullish Squeeze: Candle closes above the upper band; suggests new long positions.
    • Bearish Squeeze: Candle closes below the lower band; suggests new short positions.
  • Reversal Signals involve price testing and bouncing off the outer bands towards the middle band, signaling a potential trend change.
  • Alignment Signals (Trend Continuation) occur during strong trends ("walking the bands") interrupted by a brief pullback to the middle band, followed by a continuation candle.
  • Exit Signals (Bullish and Bearish) are triggered when a strong trend (walking the bands) is followed by a close below (bullish exit) or above (bearish exit) the middle band.
  • The Monitor Panel tracks active signals across user-defined time frames; clicking a signal switches the chart view and provides information.
  • Indicator settings allow customization of Language, Time Frames, Monitor Panel Dimensions, Indicator Depth, Signal Duration, and the core Bollinger Band Parameters (periods, shift, standard deviations).
  • Scanner Mode (advanced feature) allows the indicator to scan all securities in the Market Watch for active signals.