Envelopes Technical Indicator is formed with two Moving Averages
one of which is shifted upward and another one is shifted downward. The
selection of optimum relative number of band margins shifting is
determined with the market volatility: the higher the latter is, the
stronger the shift is.
Envelopes define the upper and the lower margins of
the price range. Signal to sell appears when the price reaches the
upper margin of the band; signal to buy appears when the price reaches
the lower margin.
The logic behind envelopes is that overzealous
buyers and sellers push the price to the extremes (i.e., the upper and
lower bands), at which point the prices often stabilize by moving to
more realistic levels. This is similar to the interpretation of Bollinger Bands.
Upper Band = SMA(CLOSE, N)*[1+K/1000]
Lower Band = SMA(CLOSE, N)*[1-K/1000]
SMA — Simple Moving Average;
N — averaging period;
K/1000 — the value of shifting from the average (measured in basis points).
Full MQL4 source of Envelopes is available in the Code Base: Envelopes
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