(BB) usually expand quickly after a increase but contract more slowly as declines. This extended time it takes for BB to contract after a drop can make trading some instruments using BB alone difficult or less profitable.
In the October 1998 issue of "Futures" there is an article written by Dennis McNicholl called "Better Bands", in which the author recommends improving BB by modifying:
- the center line formula &
- different equations for calculating the bands.
These bands, called "DEnvelope", follow price more closely and respond faster to changes in with these modifications.
Fore more indicators, check out my "Master Index of indicators" (Also check my published charts page for new ones I haven't added to that list):
More scripts related to DEnvelope:
- DEnvelope Bandwidth: http://pastebin.com/jz6QL45G
- DEnvelope %B : http://pastebin.com/r4XfrDvd
Sample chart with above indicators: https://www.tradingview.com/v/dK1uhbN8/#...
List of my indicators at Appstore: http://blog.tradingview.com/?p=970
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
// // @author LazyBear // List of all my indicators: https://www.tradingview.com/v/4IneGo8h/ // study("DEnvelope [LazyBear]", shorttitle="DENV_LB", overlay=true) lb=input(20, title="DEnvelope lookback length") de=input(2, title="DEnvelope band deviation") alp=2/(lb+1) src=hlc3 mt=alp*src+(1-alp)*nz(mt) ut=alp*mt+(1-alp)*nz(ut) dt=((2-alp)*mt-ut)/(1-alp) mt2=alp*abs(src-dt)+(1-alp)*nz(mt2) ut2=alp*mt2+(1-alp)*nz(ut2) dt2=((2-alp)*mt2-ut2)/(1-alp) but=dt+de*dt2 blt=dt-de*dt2 plot(but, color=red, linewidth=2) plot(dt, color=gray) plot(blt, color=green, linewidth=2)