The indicator BBands Stop draws along the chart yellow and orange dots connected by segments of the same color. This indicator is a type of trend and is a modified standard indicator, which is available in any terminal MetaTrader4 and is called Bollinger Bands.
BBands Stop Technical Indicator
Although this indicator BBands Stop and is a modified Bollinger Bands, but on the chart it is more like the indicator Parabolic SAR (PSAR). Since this indicator is a trend indicator, all pluses and minuses of all trend forex indicators are alien to it. The most important minus of such indicators are a lot of false signals, when the market enters lateral movement, that is, flat or even as it is called a “corridor”.
BBands Stop Technical Indicator parameters:
Length – length;
Deviation – deviation;
MoneyRisk – money risk;
Signal – type of indicator on the graph:
0 – all points are connected by segments and have the same size,
1 – the first point when changing the trend is larger in size than all the subsequent ones,
2 – the big point at change of a trend, and then a broken line without points;
Line – displays the line (1 – yes, 0 – no);
Nbars – the number of bars in the history for calculation.
Description of the parameters:
The smaller the parameter ” Length “, the faster the indicator becomes, and reacts faster to the trend change, and to the price change, after a trend change;
the ” Deviation ” parameter allows to set the deviation of the indicator from the price, if this parameter is set to “0”, the indicator will look like Moving Average;
when the ” MoneyRisk ” parameter is increased, the distance between the graph and the indicator is also increased.
How to use BBands Stop Technical Indicator?
as I have already written this trend indicator and gives a lot of false signals in the “corridor”. But at the same time it works very well in the trend, so to filter out false signals, it is desirable to use an additional indicator to identify the flat.
The principle of trading on the indicator is very simple, open the position after closing the candle (bar) when the indicator changes direction, the initial stop is set at the level of the indicator, and then we move the trailing stop after the indicator.
The indicator settings should be set so that the indicator’s performance matches your trading style, for example, the ” Length ” parameter is responsible for the speed of the indicator’s response to a change in trend direction. A smaller value of this parameter is suitable for scalpers, and a higher value is suitable for traders who trade on a long-term basis.