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How to Use Envelopes Forex Trading Indicator

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Feb 21, 2011 09:24 pm

Envois: 22
Membre depuis: 12/02/2011

Envelopes are one of the forex technical analysis tools that are used by technical traders. We can churn out lots of profits from using this indicator properly. They are basically Moving Average Envelopes and consist of 2 moving averages calculated as simple, exponential et al, one placed upward and the other downward. Sometimes we see a third line, the central moving average from which there is a twist – this is the base of the Envelopes. The Envelopes define the upper and lower price range margins. The choice of the best relative number of band margin shifting is determined by the market volatility.

It is an established fact that the envelopes determine boundaries – the upper and lower boundaries – depicting prices of currency pairs in real time action. When using this indicator you should know that the price basically turns back to its normal trend after some alterations – this is the moving average. The Envelopes are such that the more we see price differential from the normal trend, the more investors fix profits, and this brings price in it normal channel.

The upper and lower Envelopes have its lines drawn above and below moving average technical indicator such that their distance apart equals fixed % of this moving average.

Interpretations and Possible alert Patterns of the Envelopes Indicator When trying to interpret the Envelopes, they work similar to the Bollinger Bands and as such within the normal trading range of a currency pair or other financial instrument they are able to define the trading boundaries in between upper and lower limits.

Some possible trading patterns that should be observed include: - During trending market it is advisable to take only alerts from price Envelopes in the major direction of the trend. For instance if our major trend is bullish, we’ll only accept an oversold alert from price Envelopes. On the other hand, if it’s down, we’ll only consider an overbought price Envelopes. - For a ranging market the alerts from a price Envelopes are bearish when the currency pair or any other instrument touches the upper band and a buy alert when it touches the lower band.

The study of the workings of the Envelopes is a derivative of the Moving Average study. Although the moving average lines are not visible the price bands on the Envelopes are equal percentage distance from our simple moving average. If you add a simple moving average to you chart alongside the Envelopes it would be so evident their equidistance property.

Although, we have quite a number of trading rules out there, the simplest remains using the price band as an entry/exit point. If price cuts the upper band a long position should be taken. If you hold a short position at this time, I’ll advice that close it and go bullish. The opposite applies if price cut across the lower band.

Sep 05, 2011 10:51 pm

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Membre depuis: 08/02/2011

i hear first time about this can you plz share more informatin about indicator and share the indicator also here. Xynafx ... fund managers and forex signal service providers Minimum investment for our Forex managed Account service is $2k that will be managed individually in one investors account. XynaFx signals As low as $26 per Month.

Mar 30, 2012 03:54 am
ironical User

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Membre depuis: 22/04/2011

It looks like 3 SMA trading method.

The good or ill of a man lies within his own will. – Epictetus

Apr 01, 2012 06:34 pm
Champ User

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Membre depuis: 17/05/2011

Originally posted by ironical

It looks like 3 SMA trading method.

SMAs r widely used as trending indicators. So u might have seen a similar system on many sites. But not all can work for u. You have to practice and then u can decide which method is producing good results.

Apr 12, 2012 05:21 pm
mrinalini User

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Membre depuis: 12/04/2012

It is related to moving averages I guess. I am although still learning Moving averages but have not yet come across this term ENVELOPES. I will try to find and figure it out .

Jul 02, 2012 03:14 pm
bharat23 User

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Membre depuis: 26/04/2012

Well i like to say that we should not have to completely depend upon any indicator because they are not 100% correct and with it we have to use our strategy and knowledge.

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