Bollinger Bands with Squeeze

kemarin dulu

This is a standard Bollinger Bands indicator with default values 20-period, 2 standard deviations. The outer bands changes color (default=blue, squeeze=red) when the Bollinger Bands go inside the Keltner Channel with default 20-period, factor 1.5. The Keltner channel itself is not displayed in order to keep the chart clean, only showing the Bollinger Bands. So with default values, the Bollinger Bands are 'blue'. When they move inside the Keltner Band values (internally determined), the Bollinger Bands turn 'red'.

This is the chart representation of what is known as the 'squeeze'. It is often that prices can 'fire' out of this squeeze zone as volatility increases (the Bollinger Bands widen). I created the indicator because after a search did not find one (that worked) where you can just place the Bands on the chart 'alone' without the Keltner channels and have it 'indicate' (change color') where prices are in a 'squeeze' zone.

As to what direction prices are likely to break out of the squeeze zone (referred to as 'fire' from), that determination is subject to the trader/chartist interpretation of other indicators and price action.