Bollinger %B Node
Price Location Within Bollinger Bands
Overview
Bollinger %B (pronounced "B percent") indicates where price is positioned within the Bollinger Bands. The indicator normalizes price location as a percentage from 0 (lower band) to 1 (upper band).
%B = 0.5 indicates price is at the middle band (SMA). %B > 1 means price is above the upper band (overbought), while %B < 0 means price is below the lower band (oversold). This makes %B ideal for identifying extreme conditions and mean reversion opportunities.
Formula
Parameters
| Parameter | Type | Default | Description |
|---|---|---|---|
| period | number | 20 | Lookback for Bollinger Bands |
Common Use Cases
1. Overbought/Oversold Detection
%B > 1 indicates overbought conditions at the upper band. %B < 0 indicates oversold at lower band, suggesting potential reversals.
2. Reversal Signals
When %B crosses 0 or 1, price is leaving band extremes, suggesting potential reversal from overbought/oversold.
3. Band Breakout Confirmation
When %B > 1, a breakout above upper band is confirmed, suggesting strong uptrend. %B < 0 confirms downtrend breakout.
4. Mean Reversion Trading
%B extremes > 1 or < 0 often precede reversions toward the middle band (50), ideal for mean reversion strategies.
Popular Period Settings
| Period | Strategy | Signal |
|---|---|---|
| 9-10 | Fast mean reversion | Quick extremes |
| 20 | Standard swing trading | Reliable overbought/oversold |
| 50 | Position trading | Long-term extremes |
Advantages & Limitations
Advantages
- •Clear overbought/oversold identification
- •Normalized 0-1 scale is intuitive
- •Great for mean reversion trades
- •Works well as confirmation indicator
Limitations
- •Lagging indicator like Bollinger Bands
- •Extremes can persist in strong trends
- •Not reliable in choppy markets
Tips & Best Practices
📊 Extremes Signal Potential Reversals
When %B > 1.2 or < -0.2, expect mean reversion toward the middle band, not continuation.
⚡ Strong Trends Break This Rule
In strong uptrends, %B can stay > 0.8 for extended periods. Use with trend indicators to avoid false signals.
💰 Combine with RSI
Use %B > 1 combined with RSI > 70 for stronger overbought signals. Divergences provide powerful trade setups.
⚠️ Near 0.5 = No Signal
When %B is near 0.5 (price at middle band), the signal is neutral. Wait for clear moves away from center.
Example Strategy
Mean reversion strategy using Bollinger %B:
1. Setup
Add Bollinger %B(20) and set alert triggers at 1.0 and 0.0
2. Entry - Long
When %B < 0 (below lower band) and starts rising back toward 0.5
3. Stop Loss
Below recent swing low or 1 ATR below entry
4. Profit Target
Near 0.5 (middle band) for conservative; 0.8-1.0 for aggressive
Related Indicators
Bollinger Bands
The foundation for %B calculation
RSI
Similar overbought/oversold concept using momentum
Stochastic
Alternative overbought/oversold indicator
Band Width
Complement measure showing band expansion