EURUSD 1.1663 USDJPY 111.11 USDCAD 1.2539 EURCZK 26.044 USDCZK 22.325 EURPLN 4.2624 USDPLN 3.6542
EURUSD 1.1663 USDJPY 111.11 USDCAD 1.2539 EURCZK 26.044 USDCZK 22.325 EURPLN 4.2624 USDPLN 3.6542

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Envelopes, consisting of two moving average price bands, are aimed at identification of extreme market prices

Rule of thumb

Moving averages used in the envelopes created by MetaTrader 5 can be based on the standard formula, as well as exponential, smoothed and weighted

 

It is also possible to experiment with shifting the envelopes horizontally

The envelopes indicator is based on two moving averages, shifted in the direction of  market maximums and minimums respectively, where the size of the shift depends on the volatility of the market, and is measured in standard deviation. As such, envelopes define the margins of  a price range.

 

Envelopes, Bollinger, moving averages, trend

 

Interpretation of envelopes is similar as in the case of Bollinger bands. It is assumed that  a price, when reaching one of the bands, indicates a short term trend reversal. This can happen immediately, as it is with price spikes and other types of short-term movements. However, it has to be noted that prices can remain in the vicinity of one of the envelopes for a longer time, in the case of a strong market trend.

 

How to use it with MetaTrader 5:

  • Go to Insert - Indicators - Trend – Envelopes
  • Select the method of calculation of the moving averages: Simple, Exponential, Smoothed, Linear weighted
  • Define the deviation from the market price
  • The Bollinger Bands will be created automatically for you by MetaTrader 5

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