Bollinger Band RSI

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Bollinger Band RSI

This indicator serves as an innovative tool with the purpose of measuring volatility, identifying trends, and signaling potential market reversals. Its unique attributes include offering enhanced insights into overbought and oversold conditions, price convergence, and volatility measurements. This amalgamation provides valuable observations into how prices behave in relation to the two bands and oversold/overbought conditions.

Key Features & Settings

  • Overbought and Oversold Conditions: This indicator visually offers a clear representation of where the market may be considered overbought or oversold upon price touching and entering the upper and lower bands.
  • Relative Strength Index: This indicator has an inbuilt Relative Strength Index that is used to identify overbought or oversold conditions in the market. If the price is penetrating the upper Bollinger Band and the Relative Strength Index value is above 70, the candle’s body will display in yellow. Likewise, if the price is penetrating the lower Bollinger Band and the Relative Strength Index value is below 30, the candle’s body will display in green.
  • Volatility measurement: The width of the Bollinger Bands is directly related to volatility. During periods of high volatility, the bands widen, during low volatility they contract. Users are presented with a visual representation in yellow upon the convergence of the Bollinger Bands.

Parameters

  •  Length: The period of the Simple Moving Average that serves as the foundation for the Bollinger bands
  •  Multiplier: The standard deviations from the Moving Average that determine the positions of the upper and lower Bollinger bands.
  •  Relative Strength Index: The default time period used to calculate the initial RSI value is 14.

The reasoning behind this indicator revolves around the principles of gauging volatility and identifying market reversals through a modified blend of Bollinger Bands and the Relative Strength Index. This approach is rooted in the idea of mean reversion concerning price. It’s crucial to regard this indicator as integral components of an analytical process and not blindly adhere to them.

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