MTF_BBands Stops
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This tool is a technical analysis indicator designed to help traders identify market trends and establish dynamic support and resistance levels (often referred to as "trailing stops") based on the Bollinger Bands volatility framework.
Core Logic Overview
The script operates by analyzing price action relative to the outer boundaries of the Bollinger Bands. Instead of simply following the bands linearly, it employs a logic that "locks" certain values to ensure that stop levels only move in a favorable direction, preventing the indicator from trailing backward during minor retracements.
Key Components of the Logic
1. Trend Detection The script identifies the current market direction by comparing the closing price to the Bollinger Band boundaries:
- Uptrend: Triggered when the closing price breaks above the upper Bollinger Band.
- Downtrend: Triggered when the closing price breaks below the lower Bollinger Band.
2. Dynamic Stop Calculation (Trailing Logic) Once a trend is established, the script calculates a specific "Stop" line based on the distance between the upper and lower bands. It incorporates a "Money Risk" factor, which allows users to adjust the offset of these lines.
- In an Uptrend: The logic tracks the lower boundary. If the new calculated stop is higher than the previous one, it updates; if it is lower (meaning the market is pulling back), the stop stays at its highest previous level.
- In a Downtrend: The logic tracks the upper boundary. If the new calculated stop is lower than the previous one, it updates; if it is higher, the stop remains at its lowest previous level.
This "ratchet" effect ensures that the stop levels only move in your favor as the trend matures.
3. Visual Signaling and Customization The script provides three distinct ways to view this data on a chart based on user preferences:
- Signals: It can display specific markers (arrows) at the exact moment a new trend is confirmed or a stop level is hit.
- Stops/Lines: It can draw continuous lines representing the current trailing stop levels, allowing traders to see exactly where their "exit" point sits in real-time.
- Filtering: Users can toggle between seeing just the signals, just the lines, or both simultaneously.
Summary for Traders
Essentially, this script automates the process of identifying a strong move and then draws a protective line that follows that move. It effectively "trails" the price, providing a visual cue for where a trend might be considered exhausted, while ignoring minor market noise that might otherwise cause a trader to exit a position too early.
//+------------------------------------------------------------------+
//| BBands_Stop_v1.mq4 |
//| Copyright © 2006, TrendLaboratory Ltd. |
//| http://finance.groups.yahoo.com/group/TrendLaboratory |
//| E-mail: igorad2004@list.ru |
//+------------------------------------------------------------------+
#property copyright "Copyright © 2006, TrendLaboratory Ltd."
#property link "http://finance.groups.yahoo.com/group/TrendLaboratory"
#property indicator_chart_window
#property indicator_buffers 6
#property indicator_color1 Blue
#property indicator_color2 Red
#property indicator_color3 Blue
#property indicator_color4 Red
#property indicator_color5 Blue
#property indicator_color6 Red
//---- input parameters
extern int Length=20; // Bollinger Bands Period
extern int Deviation=2; // Deviation
extern double MoneyRisk=1.00; // Offset Factor
extern int Signal=1; // Display signals mode: 1-Signals & Stops; 0-only Stops; 2-only Signals;
extern int Line=1; // Display line mode: 0-no,1-yes
extern int Nbars=5000;
extern int TimeFrame=0;
//---- indicator buffers
double UpTrendBuffer[];
double DownTrendBuffer[];
double UpTrendSignal[];
double DownTrendSignal[];
double UpTrendLine[];
double DownTrendLine[];
//+------------------------------------------------------------------+
//| Custom indicator initialization function |
//+------------------------------------------------------------------+
int init()
{
string short_name;
//---- indicator line
SetIndexBuffer(0,UpTrendBuffer);
SetIndexBuffer(1,DownTrendBuffer);
SetIndexBuffer(2,UpTrendSignal);
SetIndexBuffer(3,DownTrendSignal);
SetIndexBuffer(4,UpTrendLine);
SetIndexBuffer(5,DownTrendLine);
SetIndexStyle(0,DRAW_ARROW);
SetIndexStyle(1,DRAW_ARROW);
SetIndexStyle(2,DRAW_ARROW);
SetIndexStyle(3,DRAW_ARROW);
SetIndexStyle(4,DRAW_LINE);
SetIndexStyle(5,DRAW_LINE);
SetIndexArrow(0,159);
SetIndexArrow(1,159);
SetIndexArrow(2,108);
SetIndexArrow(3,108);
IndicatorDigits(MarketInfo(Symbol(),MODE_DIGITS));
//---- name for DataWindow and indicator subwindow label
short_name="BBands Stop("+Length+","+Deviation+")";
IndicatorShortName(short_name);
SetIndexLabel(0,"UpTrend Stop");
SetIndexLabel(1,"DownTrend Stop");
SetIndexLabel(2,"UpTrend Signal");
SetIndexLabel(3,"DownTrend Signal");
SetIndexLabel(4,"UpTrend Line");
SetIndexLabel(5,"DownTrend Line");
//----
SetIndexDrawBegin(0,Length);
SetIndexDrawBegin(1,Length);
SetIndexDrawBegin(2,Length);
SetIndexDrawBegin(3,Length);
SetIndexDrawBegin(4,Length);
SetIndexDrawBegin(5,Length);
//----
return(0);
}
//+------------------------------------------------------------------+
//| Bollinger Bands_Stop_v1 |
//+------------------------------------------------------------------+
int start()
{
int i,shift,trend;
double smax[25000],smin[25000],bsmax[25000],bsmin[25000];
for (shift=Nbars;shift>=0;shift--)
{
UpTrendBuffer[shift]=0;
DownTrendBuffer[shift]=0;
UpTrendSignal[shift]=0;
DownTrendSignal[shift]=0;
UpTrendLine[shift]=EMPTY_VALUE;
DownTrendLine[shift]=EMPTY_VALUE;
}
for (shift=Nbars-Length-1;shift>=0;shift--)
{
smax[shift]=iBands(NULL,TimeFrame,Length,Deviation,0,PRICE_CLOSE,MODE_UPPER,shift);
smin[shift]=iBands(NULL,TimeFrame,Length,Deviation,0,PRICE_CLOSE,MODE_LOWER,shift);
if (Close[shift]>smax[shift+1]) trend=1;
if (Close[shift]<smin[shift+1]) trend=-1;
if(trend>0 && smin[shift]<smin[shift+1]) smin[shift]=smin[shift+1];
if(trend<0 && smax[shift]>smax[shift+1]) smax[shift]=smax[shift+1];
bsmax[shift]=smax[shift]+0.5*(MoneyRisk-1)*(smax[shift]-smin[shift]);
bsmin[shift]=smin[shift]-0.5*(MoneyRisk-1)*(smax[shift]-smin[shift]);
if(trend>0 && bsmin[shift]<bsmin[shift+1]) bsmin[shift]=bsmin[shift+1];
if(trend<0 && bsmax[shift]>bsmax[shift+1]) bsmax[shift]=bsmax[shift+1];
if (trend>0)
{
if (Signal>0 && UpTrendBuffer[shift+1]==-1.0)
{
UpTrendSignal[shift]=bsmin[shift];
UpTrendBuffer[shift]=bsmin[shift];
if(Line>0) UpTrendLine[shift]=bsmin[shift];
}
else
{
UpTrendBuffer[shift]=bsmin[shift];
if(Line>0) UpTrendLine[shift]=bsmin[shift];
UpTrendSignal[shift]=-1;
}
if (Signal==2) UpTrendBuffer[shift]=0;
DownTrendSignal[shift]=-1;
DownTrendBuffer[shift]=-1.0;
DownTrendLine[shift]=EMPTY_VALUE;
}
if (trend<0)
{
if (Signal>0 && DownTrendBuffer[shift+1]==-1.0)
{
DownTrendSignal[shift]=bsmax[shift];
DownTrendBuffer[shift]=bsmax[shift];
if(Line>0) DownTrendLine[shift]=bsmax[shift];
}
else
{
DownTrendBuffer[shift]=bsmax[shift];
if(Line>0)DownTrendLine[shift]=bsmax[shift];
DownTrendSignal[shift]=-1;
}
if (Signal==2) DownTrendBuffer[shift]=0;
UpTrendSignal[shift]=-1;
UpTrendBuffer[shift]=-1.0;
UpTrendLine[shift]=EMPTY_VALUE;
}
}
return(0);
}
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