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Bollinger Squeeze Filter

Mike
 Mike
(@vanguardai)
Co-Founder Admin

We make the most money by riding trends and so I used to ask my students, when do trends start? The answer is that it starts right after a consolidation, and the longer or tighter the consolidation, the more powerful the succeeding move can be. One way to check the "tightness" of a consolidation is by using Bollinger Bands, once we see the squeeze, we know a big move will usually follow.

A caveat though, the squeeze doesn't have a directional bias by itself, you will need to use it in tandem with another indicator to see whether the explosive move will be to the upside or the downside. A neat trick you can use is to check where prices are before the breakout, is it in the top half of the Bollinger Bands? Then the bias is to the upside.

What we did in this script, is that we check whether volatility is in its lowest in the past 120 days. Feel free to adjust the sensitivity to match your strategy.

Grab the script here

//Bollinger Squeeze filter

set dev = sdv(close,20,2,simple)
set dev_max = max(dev,120)
set dev_min = min(dev,120)
set squeeze = (dev != 0) and dev = dev_min
plot(squeeze,buy,img,main)

#Bollinger Bands
Set BBT = BBT(Close, 20, 2, SIMPLE)
Set BBM = BBM(Close, 20, 2, SIMPLE)
Set BBB = BBB(Close, 20, 2, SIMPLE)
PlotRange(BBM,BBT,seagreen,main)
PlotRange(BBM,BBB,firebrick,main)
signals(squeeze,false)

1625803536-bb_squeeze.png
1625803648-bb_squeeze2.png
This topic was modified 3 weeks ago by Mike
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Topic starter Posted : 09/07/2021 12:05 pm
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