Volatility-based channel indicator?

A Three Bands Forex Trading Indicator is a volatility-based channel indicator that helps traders identify overbought/oversold conditions, trend direction, and potential reversal zones. It’s similar in concept to Bollinger Bands, but it can be customized with different moving averages or volatility measures. Let’s break it down clearly 👇


🧭 What “Three Bands” Means

The indicator consists of:

  1. Upper Band (Resistance Zone)
    • Represents potential overbought levels.
    • Price touching or crossing this band may signal a sell or reversal down.
  2. Middle Band (Trend Line)
    • Usually a moving average (SMA, EMA, or WMA).
    • Defines the current trend direction.
    • Acts as a dynamic support/resistance line.
  3. Lower Band (Support Zone)
    • Represents potential oversold levels.
    • Price touching or crossing this band may signal a buy or reversal up.

⚙️ Common Formulas

Example 1: Bollinger-Style Three Bands

Middle Band = SMA(Close, 20)
Upper Band  = Middle Band + 2 * StdDev(Close, 20)
Lower Band  = Middle Band - 2 * StdDev(Close, 20)

Example 2: ATR-Based Channel

Middle Band = EMA(Close, 50)
Upper Band  = Middle Band + 1.5 * ATR(14)
Lower Band  = Middle Band - 1.5 * ATR(14)

📈 How Traders Use It

1. Trend Following

  • When price stays above the middle band, trend is bullish.
  • When price stays below the middle band, trend is bearish.
  • Entry signals can be generated when price retests the middle band and bounces.

2. Reversal / Mean Reversion

  • Buy near the lower band when price is oversold.
  • Sell near the upper band when price is overbought.
  • Combine with RSI or MACD for confirmation.

3. Breakout Trading

  • Strong break above upper band = possible bullish breakout.
  • Strong break below lower band = possible bearish breakout.

📊 Example Settings (MT4/MT5)

Band TypePeriodMultiplierDescription
Upper Band202Overbought / Resistance
Middle Band20Moving Average
Lower Band202Oversold / Support

🧠 Tips for Better Accuracy

  • Use non-repainting MAs (like EMA or SMA, not Hull).
  • Confirm signals with volume, RSI, or trend strength.
  • Works best on H1–H4 timeframes for Forex.
  • Adapt multipliers to volatility of the pair (e.g., 1.5×ATR for EURUSD, 2.5×ATR for GBPJPY).

Would you like me to:

  1. Create the MT5 code for this “Three Bands Indicator” (non-repainting, with buy/sell signals),
    or
  2. Explain a full trading strategy that uses this indicator effectively?

👉 Choose one and I’ll build it for you.

A Three Bands Forex Trading Indicator is a channel-based system that uses three dynamic lines (bands) to analyze volatility, trend direction, and potential reversal zones — similar to Bollinger Bands or Keltner Channels, but with different logic depending on the variant.

Let’s go through it step-by-step 👇


🧠 Concept Overview

The Three Bands Indicator consists of:

  1. Upper Band (Resistance Zone) – suggests overbought or potential sell areas.
  2. Middle Band (Trend Baseline) – identifies the current trend direction.
  3. Lower Band (Support Zone) – suggests oversold or potential buy areas.

The idea is:

  • Buy near the lower band when price shows reversal signs.
  • Sell near the upper band when price shows exhaustion or divergence.
  • Avoid trading when the price is chopping around the middle band.

⚙️ Common Variants

Here are the 3 most popular types of Three Bands Indicators used in Forex:

1. Bollinger Bands (Classic Version)

  • Uses SMA (Simple Moving Average) and standard deviation.
  • Formula:
    • Middle Band = SMA(n)
    • Upper Band = SMA(n) + k × StdDev(n)
    • Lower Band = SMA(n) – k × StdDev(n)

Signals:

  • Price touches lower band → oversold → possible buy
  • Price touches upper band → overbought → possible sell
  • Bands expand → volatility increasing
  • Bands contract → upcoming breakout

2. Keltner Channel

  • Uses EMA (Exponential Moving Average) and ATR (Average True Range) for smoother movement.
  • Formula:
    • Middle Band = EMA(n)
    • Upper Band = EMA(n) + k × ATR(n)
    • Lower Band = EMA(n) – k × ATR(n)

Signals:

  • Price breaks above upper band → bullish momentum → buy continuation
  • Price breaks below lower band → bearish momentum → sell continuation
  • Tight bands → breakout setup

3. Custom “Triple Band Channel” (Hybrid Strategy)

This version combines Bollinger + Keltner or even adds an adaptive dynamic band (based on volatility).
You can use:

  • Outer Bands → Bollinger (high sensitivity)
  • Middle Band → Keltner or Hull Moving Average (smooth trend line)
  • Optional 3rd outer layer → Dynamic volatility range

This hybrid setup gives:

  • Precise trend detection
  • Non-repainting support/resistance
  • Multi-timeframe confluence

📈 Typical Trading Strategy

Buy Setup:

  1. Price touches or closes below the lower band
  2. Candle closes back above it
  3. Middle band slopes upward → confirm uptrend
  4. Place SL below swing low, TP near middle or upper band

Sell Setup:

  1. Price touches or closes above upper band
  2. Candle closes below it
  3. Middle band slopes downward → confirm downtrend
  4. Place SL above swing high, TP near middle or lower band

🧮 Example MT5 Parameters

ParameterDescriptionTypical Value
PeriodCalculation window20
Band WidthDeviation or ATR Multiplier2.0
MA TypeSMA / EMA / HullEMA
Applied PriceClose0
AlertsOn/Offtrue

💡 Advantages

✅ Non-lagging trend filter
✅ Works on all pairs & timeframes
✅ Good for both scalping & swing trading
✅ Can combine with RSI/MACD for confirmation


🚫 Disadvantages

⚠️ Ranging markets can cause false signals
⚠️ Needs confluence to avoid whipsaws
⚠️ Shouldn’t be used standalone for entries


Would you like me to create an MT5 indicator (code) for the Three Bands system — non-repainting, showing buy/sell signals when price touches or bounces from the bands?
I can include:

  • Upper, Middle, Lower Bands
  • Arrow signals
  • Alerts & push notifications
  • Works on all pairs/timeframes

👉 Join Telegram:- https://t.me/non_repaint_mt4

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