Introduction to Moving Average Envelopes
The simplest moving averages can be transformed into a new tool – envelopes of moving averages. This tool, like the Bollinger Bands, is used to determine the boundaries of the current price movement.
Formula of Moving Average Envelopes
The indicator consists of three bands:
The upper band of the envelope: Moving Average Upper Band = Moving Average + (K / 100) x Moving Average
Where K is the percentage of the price at which the sliding moves upwards
Lower band of the envelope: Moving Average Lower Band = Moving Average – (N / 100) x Moving Average
Where N is the percentage by which the moving average moves down.
Sample chart using Moving Average Envelopes
Description of Moving Average Envelopes
The envelopes moving averages (Moving Average Envelopes) consist of two moving average (which may be considered as a simple exponential or on a different principle), displaced one up and the other down by a percentage (called envelope…