BBP
Bollinger Percent B (BBP) is an indicator developed by John Bollinger as a complement to the Bollinger Bands indicator. BBP shows the price location relative to the upper and lower Bollinger Bands.
To use the indicator, you need to use the BollingerPercentB class.
Description
The Bollinger Percent B indicator determines the price position relative to the upper and lower Bollinger Bands as a percentage value from 0 to 1 (or from 0% to 100%). This allows for a more precise determination of the price position in the context of Bollinger Bands:
- A value of 1 (or 100%) means the price is at the upper Bollinger Band.
- A value of 0 (or 0%) means the price is at the lower Bollinger Band.
- A value of 0.5 (or 50%) means the price is at the middle Bollinger Band (SMA).
BBP can also take values outside the 0-1 range:
- Values above 1 indicate that the price is above the upper Bollinger Band.
- Values below 0 indicate that the price is below the lower Bollinger Band.
Parameters
The indicator has the following parameters:
- Length - SMA calculation period (default value: 20)
- StdDevMultiplier - standard deviation multiplier for calculating Bollinger Bands (default value: 2)
Calculation
The Bollinger Percent B calculation is based on the formula:
BBP = (Price - Lower Bollinger Band) / (Upper Bollinger Band - Lower Bollinger Band)
Where:
- Price - current price (usually closing price)
- Lower Bollinger Band = SMA - (StdDevMultiplier * Standard Deviation)
- Upper Bollinger Band = SMA + (StdDevMultiplier * Standard Deviation)
- SMA - simple moving average over the Length period
- Standard Deviation - price standard deviation over the Length period
Usage
Bollinger Percent B can be used in various ways:
Identifying Overbought/Oversold Conditions:
- Values above 1 indicate an overbought market
- Values below 0 indicate an oversold market
Reversal Signals:
- When BBP returns to the 0-1 range after going outside it
- Divergences between BBP and price
Trend Determination:
- BBP values consistently above 0.5 indicate an upward trend
- BBP values consistently below 0.5 indicate a downward trend
Finding Hidden Support and Resistance Levels:
- Levels 0.8 and 0.2 are often used as additional support and resistance levels
