Envelopes (Moving Average Envelope, Trading Bands) is a technical indicator that consists of two moving averages: one moving upward, the other moving downward. This indicator defines the upper and lower boundaries of the price range. Higher volatility should lead to higher deviation percentage.
One should bear in mind that since only previous data is used for the calculation of this indicator, it will always be a bit behind actual prices. As a result, it does not predict any changes in the trend, but only identifies it.
Methods of use:
| 1. | When the indicator reaches its low and turns in the opposite direction, it can be treated as a signal to buy. |
| 2. | When the indicator reaches its high and turns in the opposite direction, it can be treated as a signal to sell. |
