Moving Average Envelope

A moving average band, or envelope, forms a channel or zone of commitment around a moving average. A moving average is calculated first, and then a band above and below the average is calculated.

Formula:

Upper Band:

Where:

UB = upper band

MAt = current moving average value

U% = upper percentage value

And:

Lower Band:

Where:

LB = lower band

MAt = current moving average value

L% = lower percentage value

The moving average in a moving average envelope can be calculated using any of the moving averages.

Parameters

Parameter

Function

Avg. Type

Sets the type of calculation for the moving average:

Option	Function
Exponential	Exponential moving average.
Hamming	Hamming moving average.
Modified	Modified moving average.
Simple	Simple moving average.
Weighted	Weighted moving average.

Color

The defalt color of the center line is green; lower envelope line default is cyan; upper line default is violet. To change the color, click on the color button:

Then choose the color you want from the Color Menu.

Graph

Sets the drawing method for the study.

Option	Function
Bars	Renders the study as bars.
Dots	Renders the study as dots.
Dotted	Renders the study as dots.
Histogram	Renders the study as a histogram drawn from 0.
Line (Default)	Renders the study as a line.
Not Drawn	The study is not rendered.

Line Style

Sets the rendering technique of the graph parameter (if it is set to Line).

Option	Function
Dash-Dot	--l-l-l-l-l-l-
Dash-Dot-Dot	----ll----ll----
Dashed	- - - - - - - - - - - - - - -
Dotted	llllllllll
Solid (Default)	-------------------------

Line Width

Sets the tickness of the study line.

Option	Function
1 pixel (Default)
2 pixels
3 pixels
4 pixels
5 pixels

Percent

Period

Price

The price on which the study is calculated:

Option	Function
Close	Closing price (Default).
First Study	Calculates the study using the values of the first study in the window.
H, L Midpt	Calculates the study on the mid-point of the high and low.
H, L, C Avg.	Calculates the study on the average of the High, Low, and Close.
High	High price.
Low	Low price.
Open	Opening price.
Tick Average	Calculates the study on the average of ticks in the period.

Notes

The Moving Average Envelope overlay is a member of the "envelope" class of studies. Envelopes consist of three lines, a center line and two outer bands. Envelope theory holds that price has the greatest probability of falling within the boundaries of the envelope. Prices falling outside the envelope boundaries are considered anomolies. The major differences between envelope types can be found in the calculation of the lines, in the spacing between the lines or bandwidth, and how they are interpreted.