
Using the Envelopes Indicator for Trading
The envelopes indicator is a rather unique trading indicator. Unlike most trend following indicators such as moving averages, the envelopes indicator follows the mean reversion concept.
The mean reversion is based on the principle that prices tend to revert to the mean when they deviate too far away. As such, the envelopes indicator provides traders a different way to trade the underlying markets.
The envelopes indicator is comprised of 3 bands, namely a moving average and an upper and lower band. The outer bands are placed at a fixed percentage away from the moving average.
How are Envelopes Indicator Calculated
The envelopes indicator comprises of a band and a mean.
The mean is usually an exponential moving average for a period that the trader can specify, while the upper and ...