Technical Indicator Envelopes [Channel]

Envelopes (Envelopes) - technical indicatorwhich is used, among other things, to traders, is a channel formed by two moving averages (MA). One of the data Moving Average is shifted upwards, the second is shifted downwards. The magnitude of the boundary displacement Envelopes indicator channel is determined by the activity or volatility of the selected instrument: the higher it is, the greater the shift.

The Envelopes indicator is standard for MetaTrader4 trading terminal.

Trading signals of the technical indicator Envelopes

Trading signals of the "Envelopes" indicator most often break away from the borders of the channel. That is to say buy currency pair, stock or other investment instrument is necessary when the price approaches the lower boundary of the channel. Sell signal is formed when the price chart approaches the upper boundary.

Note also that this rule works best on low timeframes - below M15. On the higher ones, more often you can see channel break signals.

The logic of trading on the rebound from indicator channel Envelopes The Bollinger Bands indicator is simple: under the pressure of a large number of buyers or sellers, prices reach their extremums (lows and highs), and then stabilize or change direction. The Bollinger Bands (BB) indicator has a similar working principle.

The formula for calculating the Envelopes indicator:

Upper Band = SMA(CLOSE, N)*[1+K/1000]

Lower Band = SMA(CLOSE, N)*[1-K/1000]

Where:

- SMA - simple moving average;
- N - averaging period of moving averages;
- K/1000 - deviations from the average (in tenths of a percent).