Relative Bandwidth as a Volatility Trading Filter

Summary

The indicator measures band width relative to average true range, using a selectable Bollinger Band, Keltner Channel, or Donchian Channel for the width calculation. It then applies Bollinger Bands to that relative-width series and compares the current reading with a chosen upper, middle, or lower reference. Inputs let users adjust the band type, lengths, moving average, and whether to seek higher or lower relative bandwidth conditions.

The author proposes using the resulting signal to filter trading zones in a separate strategy, describing higher relative bandwidth as comparatively low volatility and lower relative bandwidth as comparatively high volatility. The script exposes a signal in the data window, but does not provide performance results or a tested entry strategy. Its accompanying prose lists several possible signal values, while the shown code emits only two values, so users should inspect the implementation and define their own mapping before integrating it.

Key ideas

• Relative bandwidth is calculated as the selected channel width divided by ATR.
• The channel width can come from Bollinger Bands, Keltner Channels, or Donchian Channels.
• Bollinger Bands on the relative-width series provide adjustable comparison thresholds.
• The author suggests filtering trades by relative volatility conditions.
• The prose and code differ on possible signal values, and no strategy performance evidence is supplied.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.