Exponential Deviation Bands
A price band indicator based on exponential deviation that applies more weight to recent data and generates fewer breakouts than standard deviation bands.
Usage
Use as a tool to identify trends and potential trend reversals. Prices consistently above the upper band indicate a strong uptrend, while prices below the lower band indicate a strong downtrend.
Background
Introduced by Vitali Apirine, Exponential Deviation Bands use an EMA of the absolute deviation from a base moving average (SMA or EMA) to create volatility bands. This approach is more responsive to recent price changes than standard deviation-based Bollinger Bands.
Parameters
period(default: 20): Period for the base moving average and exponential deviation.dev_mult(default: 2.0): Multiplier for the exponential deviation.use_sma(default: false): Whether to use SMA (true) or EMA (false) as the base moving average.
Formula
\[
BaseMA = \text{SMA or EMA}(Price, n) \\
Deviation = |BaseMA - Price| \\
ExpDev = EMA(Deviation, n) \\
Upper = BaseMA + ExpDev \times multiplier \\
Lower = BaseMA - ExpDev \times multiplier
\]