Better Bollinger Band is a Bollinger Band with improved bands calculation.
The October 1998 issue of Futures features the article "Better Bollinger Bands" by Dennis McNicholl, in which the author recommends improving BB by modifying:
- center line equations
- another equation for calculating the bands.
These bands called DEnvelope with the proposed changes follow the price more accurately and respond to volatility changes faster.
The indicator has two input parameters:
- Period - calculation period
- Deviation - deviation value
Calculation:
Central = ((2.0-Alpha) * MT - UT) / (1.0-Alpha) Top = Central + Deviation * DT2 Bottom[i] = Central[i]-Deviation * DT2
where:
MT = Alpha * Median+(1.0-Alpha) * PrevMT UT = Alpha * MT+(1.0-Alpha) * PrevUT Median = (High+Low) / 2.0 DT2 = ((2.0-Alpha) * MT2-UT2) / (1.0-Alpha) MT2 = Alpha * Abs(Median-Central) + (1.0-Alpha) * PrevMT2 UT2 = Alpha * MT2+(1.0-Alpha) * PrevUT2 Alpha = 2.0 / (1.0+Period)
