Learning about Bollinger Bands a little bit over the last few days and curious to run this idea by some folks to see if they think it has any merit at all. If this is complete BS then tell me - I'm really just starting to learn about trading and crypto. Here goes:
If BBs are a measure of volatility, and are placed on the chart in relation to the MA, then it seems reasonable (to me at least) that the perceived degree of 'squeeze' needs to take the MA into account.
In other words, when the price is way lower, a squeeze will look much tighter on a chart vs an equivalent level of 'squeeze' when the price is higher. Put even more simply: 5% volatility at $100/BTC is less movement, in dollar amount, than 5% volatility at $10,000/BTC.
Right?
So, I just took the difference between the top and bottom of the band and divided it by the MA and looked at the result. Maybe call it the Price Adjusted Squeeze Ratio or something? Does an indicator like this already exist?
Anyway, at this point in time the PASR is at its tightest since just before the enormous price run started in December.
I get that Bollinger bands are not meant to be predictive - but did think it was interesting to take note of.
If BBs are a measure of volatility, and are placed on the chart in relation to the MA, then it seems reasonable (to me at least) that the perceived degree of 'squeeze' needs to take the MA into account.
In other words, when the price is way lower, a squeeze will look much tighter on a chart vs an equivalent level of 'squeeze' when the price is higher. Put even more simply: 5% volatility at $100/BTC is less movement, in dollar amount, than 5% volatility at $10,000/BTC.
Right?
So, I just took the difference between the top and bottom of the band and divided it by the MA and looked at the result. Maybe call it the Price Adjusted Squeeze Ratio or something? Does an indicator like this already exist?
Anyway, at this point in time the PASR is at its tightest since just before the enormous price run started in December.
I get that Bollinger bands are not meant to be predictive - but did think it was interesting to take note of.
Comment:
One small edit: on chart should read UTC not GMT.