informanerd

Overbought/Oversold Bands

The basis of this script is my "Hybrid Overbought/Oversold Detector" which uses many different oscillators to confirm overbought/oversold conditions. The main idea is to generate higher and lower bands around the desired moving average using an average of the volatility (ATR) and the standard deviation (StDev), of course by interfering detected overbought/oversold condition.
Simply put, the more the asset become overvalued/undervalued, the tighter the channel would be and every breakout of the bands announces a return back into the channel in near future.

By default, the multiplier of the standard deviation in the indicator settings is set to 2 which means only less than 5% of price actions would appear outside the bands. Also the default multiplier of the ATR is set to 3 which leads to some similar result, but to achieve more strict results setting StDev multiplier to 3 and ATR multiplier to 4 would be useful.

The type of the central moving average could be picked up from 6 different types which are:
- SMA ( Simple Moving Average )
- EMA ( Exponential Moving Average )
- HMA ( Hull Moving Average )
- LSMA ( Least Squares Moving Average )
- TMA (Triangular Moving Average)
- MAEMA (My Personalized Momentum Adjusted EMA )

The latter one leads to a useful combination of the channel with the momentum.
Also the script has multi-timeframe features and the user could apply calculations from other time frames to the current chart.

Hope the idea would be helpful!
Release Notes: - Added an option to change MA line width
- Added an option to colorize the MA based on detected trend
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

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Kommentarer

Thanks for sharing your script with the community. I have started testing it already. However, I will like you to clarify the quoted statement below:
"By default, the multiplier of the standard deviation in the indicator settings is set to 2 which means only less than 5% of price actions would appear outside the bands."
Are you referring to the upper and lower bands?
Svara
informanerd akintades333
@akintades333, Hey. I mean between upper and lower bands.
If you like the math, you could start by reading this article:
https://en.wikipedia.org/wiki/68%E2%80%9395%E2%80%9399.7_rule
Svara