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Momentum Deviation bands - VertexFX

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Momentum deviation bands is a client side VTL indicator. It is similar to Bollinger bands. Bollinger bands use standard deviation of price in band calculation. Momentum deviation bands use momentum of price instead of standard deviation. It is used in the same way as Bollinger bands.

Momentum deviation bands identify oversold overbought conditions in the asset price. It can be used to create mean reversion strategies as well as trend breakout strategies. A close above the upper band suggests a trend breakout. When price goes too far away from the upper band, it suggests an overbought situation and mean reversion strategies can be applied.

When the band width is relatively small and it suddenly expands, it suggests a new trend development. Trades should be confirmed with other non corelated indicators. For example, when a upward breakout is identified by the momentum deviation bands, look for confirmation with some volume based indicator.

Parameters:

Period                  - Number of bars to calculate the bands

Multiplier            -A multiplication factor, similar to standard deviation in Bollinger bands

MomPeriod        -Momentum calculation period

MomPrice           -Price field for calculations,  1 Close, 2 Open, 3 High, 4 Low, 5 Median, 6 Typical, 7 Weighted

momentum.png

MomentumDeviationBands.zip

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