How to Use Envelopes Indicators
Envelopes indicators are formed by using two moving averages where one of them is shifted by a certain percentage or number, and the other is shifted down by the same number or percent.
This forms a pair of parallel lines that usually surround the price action when the matching parameters are selected for the indicator.
When choosing Envelope indicator parameters, traders tend to use wider bands with markets that generally have higher volatility, and narrow bands with lower volatility markets. Envelopes indicators can also be centered on the price action itself, or other moving averages.
Moving Average is selected for Indicator Envelopes can also vary, with Simple Moving Average, exponential Moving Average and Weighted Moving Average all in general use.
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