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Bollinger volatility explosion

The creator of the Bollinger Bands, John Bollinger, states that periods of low volatility are often followed by periods of high volatility. When volatility increases, Bollinger Bands widen. John Bollinger further states that an "explosion" in volatility offers an opportunity for traders.

This trading signal detects when a volatility explosion based on the Bollinger Bands occurs. In order to measure and visualise the explosion, NanoTarder displays the volatility in percent in a chart below the main chart. This indicator is called the Bollinger Bands Volatility Oscillator.

A buy signal appears if:

  • the oscillator crosses above the 50% threshold, and
  • the market price is above the Bollinger Bands.
Bollinger Bands volatility explosion
This example shows a buy signal. The Bollinger Bands Volatility Oscillator explodes above the threshold and the market price is above the Bollinger Bands.

A short sell signal appears if:

  • the oscillator crosses above the 50% threshold, and
  • the market price is below the Bollinger Bands.
Bollinger Bands volatility oscillator
This example shows a short sell signal. The Bollinger Bands Volatility Oscillator explodes above the threshold and the market price is below the Bollinger Bands