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Both Upper and Lower Bollinger Bands Outside of Moving Average Topic Rating:
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f41909
Posted : Monday, July 03, 2017 7:46:54 PM
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Joined: 8/1/2010
Posts: 5

I have TC2000 v17.   I created a custom indicator based on price which returns a numeric value.   I then plotted a 50 day moving average using the custom indicator as the data source.   Then I plotted a bollinger band (20,1 or 50,1) using the moving average as the data source but both the upper and lower bollinger bands are mostly both below or above the moving average.   The moving average just moves above and below both bands.  I expected the moving average to remain inside the bollinger bands.   What am I doing wrong?   I added screen shots below as an example.

Thanks,                                                                                                                                                                   Tony

 

Bruce_L
Posted : Wednesday, July 05, 2017 10:23:48 AM


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Joined: 10/7/2004
Posts: 65,138

You aren't necessarily doing anything wrong, but the 50 period simple moving average is a lot smoothing than Real Motion itself, so the Bollinger Bands of the 40 period simple moving average is going to be a lot more stable with a lot less width than if applied to the Real Motion directly.



-Bruce
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f41909
Posted : Wednesday, July 05, 2017 11:25:52 AM
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Joined: 8/1/2010
Posts: 5

But isn't the point of the Bollinger Bands to show the standard deviation above and below the indicator?   How can I get the 50 Day Moving Average of the Real Motion indicator to display inside the upper and lower Bollinger Bands?

Bruce_L
Posted : Wednesday, July 05, 2017 11:50:59 AM


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I think I misread / misunderstood when I replied earlier. I thought you wanted Real Motion to mostly fall within the bands.

That said, there are other issues assuming you want the moving average to stay mostly within the Bollinger Bands. The primary one being that the 50 period simple moving average of Real Motion isn't "normal" in the statistical sense.

If the data distribution were approximately normal then about 68% of values would fall within the Bollinger Bands with the Std Dev set  to 1.00, 95% with SD set to 2.00 and 99.7% with SD set to 3.00.

Instead, the SMA50 is generally on either a fairly steady uptrend or a fairly steady downtrend. Except during the transitions from SMA50 moving up to down and vice versa, the most recent value is usually the highest value during the period covered by the BB or the lowest value during the period.

This means you would probably want to set your Std Dev to about 1.3 if you wanted the SMA50 to ride just inside the Bollinger Bands on its way up and down. The following topic explores this to some extent.

CCI Clone & Bollinger Bands



-Bruce
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f41909
Posted : Wednesday, July 05, 2017 12:02:09 PM
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Joined: 8/1/2010
Posts: 5

Bruce, actually by playing around with the BB some more I was able to make it work.  I changed the BB data source from the 50 day MA to the Real Motion indicator with a setting of (50,1) and it looks fine now.   Maybe the BB has to be set with each indicator consecutively so that both indicators are referenced?   Well, anyway it works so I am happy now.   Thanks for your assistance.

jcowden
Posted : Monday, January 15, 2018 8:31:35 AM
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Joined: 1/25/2005
Posts: 3

Hi Bruce,

i am a newbiie and want to add Real Motion as an indicator below my charts. My intent is to identify trader enthusiasm (increase or decrease) before the price shows it based on the 50 period SMA. Can you at least point me in the right direction? Writing formulas are foreign to me at this point, so I need a lot of help. I am sure I will get better at it as time goes on.

Thank you

DocPC
Posted : Monday, January 28, 2019 11:48:56 PM
Platinum Customer Platinum Customer

Joined: 2/25/2005
Posts: 3

Bruce,

Just ran across these messages about the RealMotion indicator. Can you forward me a copy of your interpertation of the Real Motion indicator. Have an interest in finding out if it will confirm another indicator selection result I am using.

emachines99
Posted : Sunday, March 24, 2019 12:42:08 AM
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Joined: 9/5/2016
Posts: 1

Bruce,

Can you also please send me your interpretation of the real motion indicator?

 

Thanks

Bruce_L
Posted : Monday, March 25, 2019 10:54:02 AM


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Joined: 10/7/2004
Posts: 65,138

I have sent you a copy of me interpretation of the RealMotion indicator via TCMail.



-Bruce
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