Smoothed Bollinger %b for Turning Points and Overbought Signals

Summary

This indicator adapts Bollinger %b by using a Heikin-Ashi close and TEMA smoothing. It calculates a zero-lag style smoothed price series, then positions that series relative to a weighted average and standard-deviation bands. The output is a bounded oscillator, accompanied by dynamic upper and lower reference bands around its midpoint.

The document proposes using the oscillator’s reversals to help identify Dow Theory turning points and its bounded readings to flag overbought or oversold conditions. It provides the calculation and parameter values, but no chart, backtest, or empirical comparison demonstrating that the modified version is more accurate or less choppy. The claims should therefore be treated as motivation rather than validated results. The thresholds are based on the oscillator’s own recent variability, and their usefulness may depend on market, timeframe, and parameter choices.

Key ideas

• The indicator uses a Heikin-Ashi close as its input instead of the standard close.
• TEMA smoothing and a zero-lag adjustment are applied before calculating the %b-style oscillator.
• Dynamic reference bands are formed around the oscillator midpoint using its recent standard deviation.
• The proposed uses are detecting oscillator reversals and identifying overbought or oversold conditions.
• The document supplies formulas and settings but no empirical performance evidence.

Tags

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