Price Envelopes

Type

Other indicator

Short introduction

Price envelopes, like Bollinger Bands, are based on a moving average, but their calculation is somewhat simpler.

Statement

The statement with Price Envelopes is similar as with the Bollinger Bands. A MA is calculated on the basis of which two (upper and lower) bands are calculated. The distance of the bands from the MA is usually identical. A large part of the prices is captured in an envelope.

Formula/calculation

Upper band = MA - Upper distance

Lower band = MA - Lower distance

Interpretation

Price envelopes offer some interpretation possibilities. The standard interpretation corresponds to that described for the Bollinger Bands. Because the envelopes are based on MAs, all possibilities offered there for the definition of the basic MA are available. Percentage values are also used instead of the absolute distances upwards and downwards.

Default setting

• MA period: 20 periods
• Distance to upper band: 0.1
• Distance to lower band: 0.1