Home > Technical analysis > Indicators and oscillators > Envelopes (Env)
To demonstrate the Forex trading range of a certain Forex trading market over and under an average price we use Envelopes. To do this you should take an exponential moving average against the Forex market and then use a trading band by subtracting and adding a definite percentage of the day average. In this way, the price 5% over and 5% under the average will be measured.
Envelopes determine the lower and the upper margins of the price range. There are two moving averages: one of which moves upward and another one moves downward. Both are the basis of the Envelopes.
It is the market inconstancy, which defines the assortment of the best corresponding number of band margins moving. The higher this inconstancy is, the stronger the move becomes. Purchase signal occurs if the price attains the lower margin. Selling signal occurs if the price attains the upper margin of the band.
Envelopes also determine the upper and lower borders of a security's ordinary trading range. It is a sell signal if the security attains the upper band whereas a purchase signal if it moves to the lower boundary. The security volatility range influences the preferable percentage move (the more inconstant, the bigger the percentage).
The Envelopes interpretation resembles the interpretation of Bollinger Bands as two fervent dealers make the price move to the extremes. For example, the upper and lower bands point the prices, where they are often fixed, by moving to more optimum points.