Bollinger Heatmap [Quantitative]

Overview

The Bollinger Heatmap is a composite indicator that synthesizes data derived from 30 Bollinger bands distributed over multiple time horizons, offering a high-dimensional characterization of the underlying asset.

Algorithm

The algorithm quantifies the current price’s relative position within each Bollinger band ensemble, generating a normalized position ratio. This ratio is subsequently transformed into a scalar heat value, which is then rendered on a continuous color gradient from red to blue. Red hues correspond to price proximity to or extension below the lower band, while blue hues denote price proximity to or extension above the upper band.

Using default parameters, the indicator maps bands over timeframes increasing in a pattern approximating exponential growth, constrained to multiples of seven days. The lower region encodes relationships with shorter-term bands spanning between 1 and 14 weeks, whereas the upper region portrays interactions with longer-term bands ranging from 15 to 52 weeks.

Conclusion

By integrating Bollinger bands across a diverse array of time horizons, the heatmap indicator aims to mitigate the model risk inherent in selecting a single band length, capturing exposure across a richer parameter space.