Envelopes Indicator - Moving Average Envelope

Envelopes Indicator Definition

The Envelopes indicator reflects the price overbought and oversold conditions helping to identify the entry or exit points as well as possible trend break-downs.

How to Use Envelopes Indicator

The indicator consists of two SMAs that together form a flexible channel in which the price evolves. The averages are plotted around a Moving Average in a constant percentage distance which may be adjusted according to the current market volatility. Each line serves as a margin of the price fluctuation range.
In a trending market take only oversold signals in an uptrend conditions and overbought signals in a downtrend conditions.
In a ranging market the price reaching the top line serves as a sell signal, while the price at the lower line generates a signal to buy.

Envelopes Indicator

Envelopes Indicator Formula (Calculation)

Upper Band = SMA(CLOSE, N)*[1+K/1000]
Lower Band = SMA(CLOSE, N)*[1-K/1000]
Where:
SMA — Simple Moving Average;
N — averaging period;
K/1000 — the value of shifting from the average (measured in basis points).

How to use in trading platform

forexjust