Enter the new Ultimate Bands Indicator, which replaces and upgrades many of the most commonly used trading indicators, including Bollinger Bands and Keltner Channels.
As if that were not enough, it is also capable of serving as an advanced moving average, outperforming the traditional EMA and SMA in responsiveness and effectiveness. Well, the discussion hereby deals with what makes the Ultimate Bands Indicator a game-changer, how it works, and how to fit this into your trading strategy.
Understanding the Core: The Ultimate Smoother
Before moving to the bands themselves, let’s talk about the core element that makes this indicator stand out—the Ultimate Smoother. The Ultimate Smoother filter is designed to provide an advanced level of smoothing with less lag compared to an EMA or SMA. This is important for traders who require responsive yet reliable filters that do not sacrifice accuracy.
Ultimate Smoother Benefits:
- Smoothing Less Lag: Unlike the EMA, the Ultimate Smoother responds better with less lag to work its course in filtering out noise at a longer length.
- Noise Reduction: As periods increase, the Ultimate Smoother becomes stronger and immune to market noise.
- Greater Sensitivity: Where there is a great shift in prices, the indicator abruptly turns. It becomes a very powerful filter in market trends while not being too sensitive to the little fluctuations.
In head-to-head comparisons with an EMA, the Ultimate Smoother consistently outperforms it, especially when adjusted for noise reduction. This filter is an ideal choice for traders who need clarity and timely signals.
How does it replace Bollinger Bands and Keltner Channels?
Now that we have a really strong smoothing filter, let’s see why it is a great building block for bands and already a superior alternative to both Bollinger Bands and Keltner Channels.
1. Introduction to Bollinger Bands:
Bollinger Bands are calculated from a simple moving average basis by adding and subtracting a standard deviation of the price to form upper and lower bands. The distance between these bands expands and contracts as price volatility increases or decreases.
Why It Can Be Improved:
- The SMA used in Bollinger Bands is lagging in price action, especially in trending markets.
- Sometimes the standard deviation measure overreacts to sharp price gyrations, generating more false signals.
2. Keltner Channels Overview:
Keltner Channels are based on the EMA and draw bands using the ATR. It is thus volatility-adjusted in the manner in which the prices are kept within a moving channel.
Why It Can Be Improved:
- While Keltner Channels account for volatility much better than Bollinger Bands, the EMA basis can still introduce lag and might not respond quickly to sudden price movements.
- The bands based on ATR are less responsive to the market conditions compared to the more sensitive filter.
3. Introduction to Ultimate Bands Indicator:
The Ultimate Bands Indicator is based on the Ultimate Smoother, adding to it an upper and a lower band, much like it’s done when creating Bollinger Bands and Keltner Channels. Here’s what’s different:
- Responsive Bands: The bands start to react more promptly to price action without losing their smoothness.
- Improved Clarity of Signal: The channel color changes when the price closes outside the bands to signal high momentum. A close that happens outside the lower band changes the color of the channel to red to show bearish momentum, while that outside the upper band changes it to green to show bullish momentum.
How to Trade with Ultimate Bands Strategy
Although the Ultimate Bands Indicator can be powerful on its own, the way it should be used is understood. Here are some guidelines and strategies for using this indicator effectively:
1. Signals of Momentum:
This happens when the price closes outside the bands, which means very strong momentum in that direction. It gives a similar result to Bollinger Bands and Keltner Channels but in a much faster and more responsive way.
Note well: If the market is in consolidation and the bands are narrow, a small burst of momentum may not be sufficient to create a sustainable move. Always wait for substantial momentum before taking any action on the breakout signal.
2. Other Strategies:
Combine the Ultimate Bands with other indicators, such as RSI or MACD, for confirmation of potential trade entries. Use it as part of a multi-timeframe strategy to confirm trends across higher timeframes.
3. Customization Options:
By tweaking the parameters in the Ultimate Smoother, one is able to adjust the sensitivity of the bands. The longer the period, the more it will smooth out noise and simultaneously bring about lag. While with a shorter period, it is vice versa, as it then becomes more sensitive to changes in price.
Adding the Ultimate Bands Indicator to your Chart
First things first, you have to add the Ultimate Bands Indicator to your TradingView chart:
- Sign Up for TradingView: Sign up on the platform in case you don’t already have an account; the link is free and included in the description.
- How to Access the Indicator: Follow the link provided, and once forward on the TradingView page, tap the blue button with the star to add it to Favorites.
- Apply to Your Chart: Open your TradingView chart and add the Ultimate Bands Indicator from your favorites list.
Note: The Ultimate Smoother can also be used as a standalone if you like to see a clean view of the price action without the bands.
Conclusion
The Ultimate Bands Indicator already outperformed Bollinger Bands and Keltner Channels as more responsive and effective. Based on the Ultimate Smoother, it filters better, responds quicker, and yields cleaner momentum signals. If you are looking for an advanced tool that will help combine traditional bands with the precision of a modern smoothing filter, then the Ultimate Bands Indicator is something worth trying.
Want more advanced indicators? Head to the Quantifica Patreon for access to a complete library of premium tools.
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