According to Investopedia .... "In the 1980s, John Bollinger, a long-time technician of the markets, developed the technique of using a moving average with two trading bands above and below it. Unlike a percentage calculation from a normal moving average, Bollinger Bands® simply add and subtract a standard deviation calculation. Standard deviation is a mathematical formula that measures volatility, showing how the stock price can vary from its true value. By measuring price volatility, Bollinger Bands® adjust themselves to market conditions. This is what makes them so handy for traders; they can find almost all of the price data needed between the two bands."
Classic interpretations of Bollinger bands from Fidelity Investments....
"When the bands tighten during a period of low volatility, it raises the likelihood of a sharp price move in either direction. This may begin a trending move. Watch out for a false move in opposite direction which reverses before the proper trend begins.
When the bands separate by an unusual large amount, volatility increases and any existing trend may be ending.
Prices have a tendency to bounce within the bands' envelope, touching one band then moving to the other band. You can use these swings to help identify potential profit targets. For example, if a price bounces off the lower band and then crosses above the moving average, the upper band then becomes the profit target.
Price can exceed or hug a band envelope for prolonged periods during strong trends. On divergence with a momentum oscillator, you may want to do additional research to determine if taking additional profits is appropriate for you.
A strong trend continuation can be expected when the price moves out of the bands. However, if prices move immediately back inside the band, then the suggested strength is negated."
This indicator contains a standard set of Bollinger Bands with the addition of a Test Closing Price calculation function. It displays a standard set of Bollinger Bands by default.
How do I use the Test Closing Price function ?
Enter a test price in the Test Closing Price box in the settings, and then click the "Use Test Price" button.
The indicator will then replace the current Bollinger upper, lower and basis-lines with plots showing the resultant lines if price were to close at the Test Closing Price.
An information panel will appear which displays the test closing price and the resulting Bollinger-upper, Bollinger-lower and basis-line prices.
Can display up to 10 decimal places and has adjustable label offset.
It will also plot lines outlining the resultant closed candle body for clarity.
To return to "Standard Bollingers" just click off the "Use Test Price" button.
Knowing exactly what the Bollinger bands and Basis will do if a particular closing price is met can be useful in a variety of ways to traders who use Bollinger Bands® in their trading. It is possible to work out exactly what closing price is required to get above or below a Bollinger band which is normally difficult as Bollingers react to the change in price. Users can also experiment with different Test Closing Prices[/i to see exactly what effect this would have on the Basis moving average and on the Bollinger bands themselves.
Versionsinformation
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https://s3.tradingview.com/snapshots/7/7XzWYWVW.png Added "Test Bar" to more clearly show the test results. Added "Test Close" horizontal line to more clearly show the test level. Added conditional text and background color change to the test results infobox to show....
"Close above upper band" ( Lime Green )
"Close between bands" ( blue )
"Close below lower band" ( Red )
Added a "negative value filter" which replaces lower Bollinger band values below zero with zero to help with auto focus charts.
Amazing as usual ... I discovered you by following Eric Crown and I am using some of your indicators ... i love the RSI v.5 ... you are doing a wonderful job ... re configuring my tradingview setup i lost your CTHVP ... and is not anymore in the public library ... can you tell me where i can find it ? Your answer will be very well appreciated
Fantastic, thanks so much for all your work. One question about this one: have you considered building in a feature that you already put into words in the description -- "work out exactly what closing price is required to get above or below a Bollinger band ". So something similar to your reversed stochastic or reversed MA -- an option to click that would report the price at which the BB is crossed. Maybe you already have this in a different indicator. Thanks again, bro