Bermaui Bands Manual

Bermaui Bands Manual

31 May 2018, 14:03
Muhammad Elbermawi

Bermaui Bands Manual

Do you want indicators with high probability?

Do you want leading indicators?

If you answer is YES then please read the whole blog for more details, because it might change all what you know about trading.


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Bermaui Bands (BB) is a new technical analysis indicator relative to Bollinger Bands.
BB depend in its calculation on Bermaui Deviation Percent (BD%) which is another component of the Bermaui Trading Tools. Therefore, to understand Bermaui Bands you have to know about BD% first.

So what does the word Bermaui mean?

Of course, Bermaui is my nickname, but it have a meaning. The first half "Ber" means the land and the next half "maui" means the water, so Bermaui means the place where land meet water, such as the beach.

Anyone who goes to sea wants to get to the beach. Every trader in the market want to achieve success and that is what I hope for you when you use my trading tools. That is why I call Them Bermaui trading tools.

What is Bermaui Deviation Percent?

Bermaui Deviation Percent (BD%) is a volatility index that measures volatility in percent rather than points. The idea of BD% is to make an index depending on Classic Standard Deviation (CSD) that moves between 0 and 100 percent.

Measuring volatility as percentage rather than in points can be very useful in technical analysis. BD% helps technician to compare the volatility of one security with the another. In addition, BD% proved to be helpful at building Bermaui Bands which is a better alternative for Classic Bollinger Bands.

The idea after Bermaui Bands

Many years passed since I knew Bollinger Bands. I read the book "Bollinger on Bollinger Bands" several times. I like John Bollinger way of thinking about technical analysis; his knowledge inspired me to study his method in more details.

At November 2016, the Egyptian Central Bank free float the Egyptian Pound (EGP), which led to many economic changes. The Egyptian stock market had a big upside move and its index EGX30 jumped to the upside. The market gained volatility and EGX30 standard deviation reached a new all-time high.

This led me to ask about the validity of Bollinger Bands formula. I asked the question, "What will happen if standard deviation value is greater than simple moving average value?

When Bollinger bands width narrow then price candles break outside the bands we get a useful trading setup, but when Bollinger bands width expand the bands loss their value. Those ideas led me to develop Bermaui Bands.

Bermaui Bands (BB) is a technical analysis tool that help filter between ranging and trending price movements. The idea behind this indicator can be explained in the next steps:

  • Calculate Classic Standard Deviation (CSD) as oscillator that move between 0 and 100. I will name it Bermaui Deviation percent (BD %).
  • If "BD %" is near zero then volatility is at its extreme. In addition, if "BD %" is near 100 then volatility is very low.
  • High volatility mean a great probability for a trending market, while low volatility mean sideway or ranging market.
  • Bermaui Bands Middle Line is a Simple Moving Average (SMA), because Standard Deviation calculation depend on SMA.
  • Upper Bermaui Bands = SMA + (BD% x CSD)
  • Lower Bermaui Bands = SMA – (BD% x CSD)

Here is how it looks like:

Next GIF will show you Bermaui Bands with Bermaui Deviation Percent.

As you can see, BB find consolidation periods when price movement loss a big portion of its volatility. However, when price candles break outside BB a new trending area begin.


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Bollinger Bands & Bitcoin

As I said before, the Egyptian market big move led me to ask about the validity of Bollinger Bands formula. After that, Bitcoin came to confirm my suspicions.

At the beginning of 2017, Bitcoin was around 1,000$ and by the end of 2017 it hit 20,000$! That is why I wrote this:

"I have never seen something like this before. Bitcoin Upper Bollinger Bands (UBB) is around $10500 while Lower Bollinger Band (LBB) is around $910. $BTC UBB is over 11 times LBB"

After that on Bitcoin Weekly chart something strange happened. The Lower Bollinger Bands was reading negative value! This could happen only if Standard Deviation is bigger than Simple Moving Average. Look at the chart:

The same thing repeated for some other crypto currencies, and if it happened in the past then it might repeat at the future.

Can this error happen to Bermaui Bands?

The answer is NO.


Bermaui Bands formula is somehow the opposite of Bollinger Bands. When Bollinger Bands expand Bermaui Bands contract and vice versa. Look at the next chart that combine both Bollinger Bands & Bermaui Bands:

As you can see when Bollinger bands contract Bermaui Bands expands and when Bollinger bands separate from each other Bermaui bands contract toward each other. That is why Bermaui bands will not read negative value if standard deviation reading get to high.


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How to use Bermaui Bands in trading

  • Use Bermaui Bands as a filter to help you identify trend direction.
  • If BB lines separate from each other then there is a great probability that price candles will move in a side-way or a ranging movement.
  • When BB lines separate from each other and price candles move in between them then trade with a Ranging Market Strategy.
  • If BB lines combine like a single line then there is a great probability that price will move in a trending movement.
  • When BB lines combine like a single line and price candles move away from them then trade with a Trending Market Strategy.

Bermaui Bands as a filter for ranging market strategies

When Bermaui Bands separate from each other, you can trade overbought/oversold strategies and indicators.

Bermaui Bands as a trend filter

When Bermaui bands combine like a single line and price candles move away from them then trade with a trending market strategy.

Bermaui Bands Parameters

Bermaui Bands use the same parameters set like Bollinger Bands.

Bermaui Bands can be a great trading tool for those who understand its concept. It is a good trading filter between ranging and trending areas on the chart. You can see it as a better alternative for Classic Bollinger Bands. It can adapt to high volatility current markets pump then dump very quickly, like crypto currencies market.

If Bermaui Bands is great for me then it can be the same for you.

Muhammad Al Bermaui, CMT

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