Envelopes
Envelopes Technical Indicator
Section titled “Envelopes Technical Indicator”The Envelopes Technical Indicator is formed with two Moving Averages, one shifted upward and another shifted downward. The selection of the optimal number of band margin shifts is determined by market volatility, with higher volatility resulting in stronger shifts. Envelopes define the upper and lower margins of the price range. A sell signal occurs when the price reaches the upper margin, while a buy signal occurs when the price reaches the lower margin.
Logic behind Envelopes
Section titled “Logic behind Envelopes”The logic behind envelopes is that when buyers and sellers become overzealous, they push the price to extremes (upper and lower bands), after which the prices tend to stabilize and move towards more realistic levels. This concept is similar to the interpretation of Bollinger Bands®.