Envelopes
Envelopes Indicator
Envelopes technical indicator is formed on basis of two moving averages. The band margins shift depends on the market volatility: the less stable the market is, the more the shift is.The upper and the lower margins of the indicator's band define the price range. Signal to buy appears when the price reaches the margin lower of the band; signal to sell appears when the price reaches the upper margin.
The use of the Envelopes indicator is based on the fact that even after periods of high volatility provoked by overzealous sellers and buyers, they usually stabilize and return to their normal level.
Calculation:
UPPER BAND = SMA (CLOSE, N) * [1 + K / 1000]LOWER BAND = SMA (CLOSE, N) * [1 - K / 1000]
Where:
UPPER BAND - indicator's top line;
LOWER BAND - indicator's bottom line;
SMA - simple moving average;
CLOSE - closing price;
N - averaging period;
K / 1000 - the value of the deviation from the average (in tenths of per sent).
Similar information about indicators you can find in information system of trade platform MetaTrader 4 (Help-> Help Topics [F1] -> Ananlitics -> Technical Indicators).
